Correlation Between Rocket Companies and Walker Dunlop

Can any of the company-specific risk be diversified away by investing in both Rocket Companies and Walker Dunlop at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Rocket Companies and Walker Dunlop into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rocket Companies and Walker Dunlop, you can compare the effects of market volatilities on Rocket Companies and Walker Dunlop and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Rocket Companies with a short position of Walker Dunlop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Companies and Walker Dunlop.

Diversification Opportunities for Rocket Companies and Walker Dunlop

-0.42

Correlation Coefficient

Rocket Companies  Walker Dunlop

Very good diversification

The 3 months correlation between Rocket and Walker is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Companies and Walker Dunlop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walker Dunlop and Rocket Companies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Rocket Companies are associated (or correlated) with Walker Dunlop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walker Dunlop has no effect on the direction of Rocket Companies i.e., Rocket Companies and Walker Dunlop go up and down completely randomly.

Pair Corralation between Rocket Companies and Walker Dunlop

Considering the 90-day investment horizon Rocket Companies is expected to generate 2.1 times more return on investment than Walker Dunlop. However, Rocket Companies is 2.1 times more volatile than Walker Dunlop. It trades about 0.11 of its potential returns per unit of risk. Walker Dunlop is currently generating about -0.08 per unit of risk. If you would invest  1,044  in Rocket Companies on December 28, 2024 and sell it today you would earn a total of  272.00  from holding Rocket Companies or generate 26.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Rocket Companies  vs.  Walker Dunlop

Rocket Companies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Companies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, Rocket Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Walker Dunlop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walker Dunlop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Rocket Companies and Walker Dunlop

The main advantage of trading using opposite Rocket Companies and Walker Dunlop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Companies position performs unexpectedly, Walker Dunlop can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Walker Dunlop will offset losses from the drop in Walker Dunlop's long position.

The idea behind Rocket Companies and Walker Dunlop pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.