Correlation Between Walker Dunlop and Guangzhou Automobile

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

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

Diversification Opportunities for Walker Dunlop and Guangzhou Automobile

0.16

Correlation Coefficient

Walker Dunlop  Guangzhou Automobile

Average diversification

The 3 months correlation between Walker and Guangzhou is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Guangzhou Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Automobile and Walker Dunlop 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 Walker Dunlop are associated (or correlated) with Guangzhou Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Automobile has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Guangzhou Automobile go up and down completely randomly.

Pair Corralation between Walker Dunlop and Guangzhou Automobile

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 3.4 times less return on investment than Guangzhou Automobile. But when comparing it to its historical volatility, Walker Dunlop is 1.53 times less risky than Guangzhou Automobile. It trades about 0.05 of its potential returns per unit of risk. Guangzhou Automobile Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  740.00  in Guangzhou Automobile Group on August 30, 2024 and sell it today you would earn a total of  105.00  from holding Guangzhou Automobile Group or generate 14.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

Walker Dunlop  vs.  Guangzhou Automobile Group

Walker Dunlop

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walker Dunlop are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Walker Dunlop is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Guangzhou Automobile

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Automobile Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walker Dunlop and Guangzhou Automobile

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

The idea behind Walker Dunlop and Guangzhou Automobile Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.