Correlation Between Walker Dunlop and Ares Management

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

By analyzing existing cross correlation between Walker Dunlop and Ares Management, you can compare the effects of market volatilities on Walker Dunlop and Ares Management 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 Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walker Dunlop and Ares Management.

Diversification Opportunities for Walker Dunlop and Ares Management

-0.68

Correlation Coefficient

Walker Dunlop  Ares Management

Excellent diversification

The 3 months correlation between Walker and Ares is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Ares Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management 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 Ares Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Management has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Ares Management go up and down completely randomly.

Pair Corralation between Walker Dunlop and Ares Management

Allowing for the 90-day total investment horizon Walker Dunlop is expected to under-perform the Ares Management. In addition to that, Walker Dunlop is 1.02 times more volatile than Ares Management. It trades about -0.2 of its total potential returns per unit of risk. Ares Management is currently generating about 0.27 per unit of volatility. If you would invest  9,557  in Ares Management on October 8, 2024 and sell it today you would earn a total of  1,633  from holding Ares Management or generate 17.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	92.5%
Values	Daily Returns

Walker Dunlop  vs.  Ares Management

Walker Dunlop

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ares Management

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ares Management sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walker Dunlop and Ares Management

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

The idea behind Walker Dunlop and Ares Management 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.