Correlation Between Walker Dunlop and American Financial

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

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

Diversification Opportunities for Walker Dunlop and American Financial

-0.42

Correlation Coefficient

Walker Dunlop  American Financial

Very good diversification

The 3 months correlation between Walker and American is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial 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 American Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Financial has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and American Financial go up and down completely randomly.

Pair Corralation between Walker Dunlop and American Financial

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 5.62 times less return on investment than American Financial. In addition to that, Walker Dunlop is 1.33 times more volatile than American Financial Group. It trades about 0.01 of its total potential returns per unit of risk. American Financial Group is currently generating about 0.09 per unit of volatility. If you would invest  9,925  in American Financial Group on October 7, 2024 and sell it today you would earn a total of  3,175  from holding American Financial Group or generate 31.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Walker Dunlop  vs.  American Financial Group

Walker Dunlop

Risk-Adjusted Performance

0 of 100

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.

American Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Walker Dunlop and American Financial

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

The idea behind Walker Dunlop and American Financial Group 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 Directory module to find actively traded commodities issued by global exchanges.