Correlation Between Walker Dunlop and Netflix

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

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

Diversification Opportunities for Walker Dunlop and Netflix

-0.23

Correlation Coefficient

Walker Dunlop  Netflix

Very good diversification

The 3 months correlation between Walker and Netflix is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix 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 Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Netflix go up and down completely randomly.

Pair Corralation between Walker Dunlop and Netflix

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 119.43 times less return on investment than Netflix. But when comparing it to its historical volatility, Walker Dunlop is 1.25 times less risky than Netflix. It trades about 0.0 of its potential returns per unit of risk. Netflix is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  62,760  in Netflix on September 13, 2024 and sell it today you would earn a total of  24,040  from holding Netflix or generate 38.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Walker Dunlop  vs.  Netflix

Walker Dunlop

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Walker Dunlop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Walker Dunlop is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Netflix

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Netflix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walker Dunlop and Netflix

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

The idea behind Walker Dunlop and Netflix 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.