Correlation Between Walker Dunlop and Vulcan Materials

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

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

Diversification Opportunities for Walker Dunlop and Vulcan Materials

-0.42

Correlation Coefficient

Walker Dunlop  Vulcan Materials

Very good diversification

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

Pair Corralation between Walker Dunlop and Vulcan Materials

Allowing for the 90-day total investment horizon Walker Dunlop is expected to under-perform the Vulcan Materials. In addition to that, Walker Dunlop is 1.17 times more volatile than Vulcan Materials. It trades about -0.2 of its total potential returns per unit of risk. Vulcan Materials is currently generating about -0.05 per unit of volatility. If you would invest  2,781  in Vulcan Materials on October 8, 2024 and sell it today you would lose (88.00) from holding Vulcan Materials or give up 3.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.5%
Values	Daily Returns

Walker Dunlop  vs.  Vulcan Materials

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.

Vulcan Materials

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Vulcan Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walker Dunlop and Vulcan Materials

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

The idea behind Walker Dunlop and Vulcan Materials 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.