Correlation Between Birchcliff Energy and Walker Dunlop

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Can any of the company-specific risk be diversified away by investing in both Birchcliff Energy and Walker Dunlop 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 Birchcliff Energy and Walker Dunlop into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Birchcliff Energy and Walker Dunlop, you can compare the effects of market volatilities on Birchcliff Energy and Walker Dunlop 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 Birchcliff Energy with a short position of Walker Dunlop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Birchcliff Energy and Walker Dunlop.

Diversification Opportunities for Birchcliff Energy and Walker Dunlop

0.42
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between Birchcliff Energy and Walker Dunlop

Assuming the 90 days trading horizon Birchcliff Energy is expected to generate 3.1 times less return on investment than Walker Dunlop. But when comparing it to its historical volatility, Birchcliff Energy is 1.43 times less risky than Walker Dunlop. It trades about 0.05 of its potential returns per unit of risk. Walker Dunlop is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,613  in Walker Dunlop on December 29, 2023 and sell it today you would earn a total of  467.00  from holding Walker Dunlop or generate 4.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

Birchcliff Energy  vs.  Walker Dunlop

 Performance 
       Timeline  
Birchcliff Energy 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Birchcliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Birchcliff Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Walker Dunlop 

Risk-Adjusted Performance

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High
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 unsteady 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.

Birchcliff Energy and Walker Dunlop Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Birchcliff Energy and Walker Dunlop

The main advantage of trading using opposite Birchcliff Energy and Walker Dunlop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Birchcliff Energy position performs unexpectedly, Walker Dunlop 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 Walker Dunlop will offset losses from the drop in Walker Dunlop's long position.
The idea behind Birchcliff Energy and Walker Dunlop 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.
Check out your portfolio center.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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