Correlation Between Walker Dunlop and CAIRN HOMES

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

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

Diversification Opportunities for Walker Dunlop and CAIRN HOMES

0.44

Correlation Coefficient

Walker Dunlop  CAIRN HOMES

Very weak diversification

The 3 months correlation between Walker and CAIRN is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and CAIRN HOMES EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAIRN HOMES EO 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 CAIRN HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAIRN HOMES EO has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and CAIRN HOMES go up and down completely randomly.

Pair Corralation between Walker Dunlop and CAIRN HOMES

Allowing for the 90-day total investment horizon Walker Dunlop is expected to under-perform the CAIRN HOMES. But the stock apears to be less risky and, when comparing its historical volatility, Walker Dunlop is 1.12 times less risky than CAIRN HOMES. The stock trades about -0.1 of its potential returns per unit of risk. The CAIRN HOMES EO is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  226.00  in CAIRN HOMES EO on December 20, 2024 and sell it today you would lose (25.00) from holding CAIRN HOMES EO or give up 11.06% of portfolio value over 90 days.

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

Walker Dunlop  vs.  CAIRN HOMES EO

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.

CAIRN HOMES EO

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAIRN HOMES EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Walker Dunlop and CAIRN HOMES

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

The idea behind Walker Dunlop and CAIRN HOMES EO 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.