Correlation Between Walker Dunlop and Diamond Hill

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

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

Diversification Opportunities for Walker Dunlop and Diamond Hill

0.08

Correlation Coefficient

Walker Dunlop  Diamond Hill

Significant diversification

The 3 months correlation between Walker and Diamond is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Diamond Hill Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Large 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 Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Large has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Diamond Hill go up and down completely randomly.

Pair Corralation between Walker Dunlop and Diamond Hill

Allowing for the 90-day total investment horizon Walker Dunlop is expected to under-perform the Diamond Hill. In addition to that, Walker Dunlop is 2.44 times more volatile than Diamond Hill Large. It trades about -0.09 of its total potential returns per unit of risk. Diamond Hill Large is currently generating about 0.02 per unit of volatility. If you would invest  3,272  in Diamond Hill Large on December 25, 2024 and sell it today you would earn a total of  23.00  from holding Diamond Hill Large or generate 0.7% return on investment over 90 days.

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

Walker Dunlop  vs.  Diamond Hill Large

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.

Diamond Hill Large

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Hill Large are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Diamond Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walker Dunlop and Diamond Hill

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

The idea behind Walker Dunlop and Diamond Hill Large 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.