Correlation Between Walker Dunlop and CNFinance Holdings

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

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

Diversification Opportunities for Walker Dunlop and CNFinance Holdings

0.37

Correlation Coefficient

Walker Dunlop  CNFinance Holdings

Weak diversification

The 3 months correlation between Walker and CNFinance is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and CNFinance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNFinance Holdings 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 CNFinance Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNFinance Holdings has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and CNFinance Holdings go up and down completely randomly.

Pair Corralation between Walker Dunlop and CNFinance Holdings

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 3.72 times less return on investment than CNFinance Holdings. But when comparing it to its historical volatility, Walker Dunlop is 6.48 times less risky than CNFinance Holdings. It trades about 0.07 of its potential returns per unit of risk. CNFinance Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  100.00  in CNFinance Holdings on August 31, 2024 and sell it today you would lose (5.00) from holding CNFinance Holdings or give up 5.0% of portfolio value over 90 days.

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

Walker Dunlop  vs.  CNFinance Holdings

Walker Dunlop

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walker Dunlop are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Walker Dunlop may actually be approaching a critical reversion point that can send shares even higher in December 2024.

CNFinance Holdings

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNFinance Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, CNFinance Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walker Dunlop and CNFinance Holdings

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

The idea behind Walker Dunlop and CNFinance Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.