Correlation Between Walker Dunlop and STEEL DYNAMICS

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

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

Diversification Opportunities for Walker Dunlop and STEEL DYNAMICS

0.41

Correlation Coefficient

Walker Dunlop  STEEL DYNAMICS

Very weak diversification

The 3 months correlation between Walker and STEEL is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and STEEL DYNAMICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEEL DYNAMICS 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 STEEL DYNAMICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEEL DYNAMICS has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and STEEL DYNAMICS go up and down completely randomly.

Pair Corralation between Walker Dunlop and STEEL DYNAMICS

Allowing for the 90-day total investment horizon Walker Dunlop is expected to under-perform the STEEL DYNAMICS. But the stock apears to be less risky and, when comparing its historical volatility, Walker Dunlop is 1.19 times less risky than STEEL DYNAMICS. The stock trades about -0.14 of its potential returns per unit of risk. The STEEL DYNAMICS is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  11,515  in STEEL DYNAMICS on October 8, 2024 and sell it today you would lose (603.00) from holding STEEL DYNAMICS or give up 5.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Walker Dunlop  vs.  STEEL DYNAMICS

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 weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

STEEL DYNAMICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STEEL DYNAMICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, STEEL DYNAMICS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walker Dunlop and STEEL DYNAMICS

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

The idea behind Walker Dunlop and STEEL DYNAMICS 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.