Correlation Between Walker Dunlop and Honeywell International

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

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

Diversification Opportunities for Walker Dunlop and Honeywell International

0.84

Correlation Coefficient

Walker Dunlop  Honeywell International

Very poor diversification

The 3 months correlation between Walker and Honeywell is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International 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 Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Honeywell International go up and down completely randomly.

Pair Corralation between Walker Dunlop and Honeywell International

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 1.29 times more return on investment than Honeywell International. However, Walker Dunlop is 1.29 times more volatile than Honeywell International. It trades about -0.09 of its potential returns per unit of risk. Honeywell International is currently generating about -0.13 per unit of risk. If you would invest  9,494  in Walker Dunlop on December 30, 2024 and sell it today you would lose (1,092) from holding Walker Dunlop or give up 11.5% of portfolio value over 90 days.

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

Walker Dunlop  vs.  Honeywell International

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.

Honeywell International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honeywell International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Walker Dunlop and Honeywell International

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

The idea behind Walker Dunlop and Honeywell International 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.