Correlation Between Timken and Loandepot

Can any of the company-specific risk be diversified away by investing in both Timken and Loandepot 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 Timken and Loandepot into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Timken Company and Loandepot, you can compare the effects of market volatilities on Timken and Loandepot 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 Timken with a short position of Loandepot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Loandepot.

Diversification Opportunities for Timken and Loandepot

-0.38

Correlation Coefficient

Timken  Loandepot

Very good diversification

The 3 months correlation between Timken and Loandepot is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Loandepot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loandepot and Timken 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 Timken Company are associated (or correlated) with Loandepot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loandepot has no effect on the direction of Timken i.e., Timken and Loandepot go up and down completely randomly.

Pair Corralation between Timken and Loandepot

Considering the 90-day investment horizon Timken Company is expected to under-perform the Loandepot. But the stock apears to be less risky and, when comparing its historical volatility, Timken Company is 1.36 times less risky than Loandepot. The stock trades about -0.07 of its potential returns per unit of risk. The Loandepot is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  162.00  in Loandepot on December 5, 2024 and sell it today you would earn a total of  2.00  from holding Loandepot or generate 1.23% return on investment over 90 days.

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

Timken Company  vs.  Loandepot

Timken Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Loandepot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loandepot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Timken and Loandepot

The main advantage of trading using opposite Timken and Loandepot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken position performs unexpectedly, Loandepot 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 Loandepot will offset losses from the drop in Loandepot's long position.

The idea behind Timken Company and Loandepot 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.