Correlation Between UWM Holdings and Rocket Companies

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

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

Diversification Opportunities for UWM Holdings and Rocket Companies

0.94

Correlation Coefficient

UWM Holdings  Rocket Companies

Almost no diversification

The 3 months correlation between UWM and Rocket is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding UWM Holdings Corp and Rocket Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Companies and UWM Holdings 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 UWM Holdings Corp are associated (or correlated) with Rocket Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Companies has no effect on the direction of UWM Holdings i.e., UWM Holdings and Rocket Companies go up and down completely randomly.

Pair Corralation between UWM Holdings and Rocket Companies

Given the investment horizon of 90 days UWM Holdings Corp is expected to under-perform the Rocket Companies. But the stock apears to be less risky and, when comparing its historical volatility, UWM Holdings Corp is 1.23 times less risky than Rocket Companies. The stock trades about -0.22 of its potential returns per unit of risk. The Rocket Companies is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  1,960  in Rocket Companies on August 31, 2024 and sell it today you would lose (526.00) from holding Rocket Companies or give up 26.84% of portfolio value over 90 days.

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

UWM Holdings Corp  vs.  Rocket Companies

UWM Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UWM Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Rocket Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocket Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with UWM Holdings and Rocket Companies

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

The idea behind UWM Holdings Corp and Rocket Companies 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.