Correlation Between WESCO International and LOANDEPOT INC

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

By analyzing existing cross correlation between WESCO International and LOANDEPOT INC A, you can compare the effects of market volatilities on WESCO International and LOANDEPOT INC 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 WESCO International with a short position of LOANDEPOT INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESCO International and LOANDEPOT INC.

Diversification Opportunities for WESCO International and LOANDEPOT INC

0.41

Correlation Coefficient

WESCO International  LOANDEPOT INC

Very weak diversification

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

Pair Corralation between WESCO International and LOANDEPOT INC

Assuming the 90 days horizon WESCO International is expected to generate 0.41 times more return on investment than LOANDEPOT INC. However, WESCO International is 2.47 times less risky than LOANDEPOT INC. It trades about -0.36 of its potential returns per unit of risk. LOANDEPOT INC A is currently generating about -0.2 per unit of risk. If you would invest  19,157  in WESCO International on October 8, 2024 and sell it today you would lose (1,657) from holding WESCO International or give up 8.65% of portfolio value over 90 days.

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

WESCO International  vs.  LOANDEPOT INC A

WESCO International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WESCO International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WESCO International reported solid returns over the last few months and may actually be approaching a breakup point.

LOANDEPOT INC A

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LOANDEPOT INC A are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LOANDEPOT INC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WESCO International and LOANDEPOT INC

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

The idea behind WESCO International and LOANDEPOT INC A 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.