Correlation Between Walker Dunlop and Health Care

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

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

Diversification Opportunities for Walker Dunlop and Health Care

-0.15

Correlation Coefficient

Walker Dunlop  Health Care

Good diversification

The 3 months correlation between Walker and Health is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Health Care Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Select 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Select has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Health Care go up and down completely randomly.

Pair Corralation between Walker Dunlop and Health Care

Allowing for the 90-day total investment horizon Walker Dunlop is expected to under-perform the Health Care. In addition to that, Walker Dunlop is 2.71 times more volatile than Health Care Select. It trades about -0.01 of its total potential returns per unit of risk. Health Care Select is currently generating about 0.03 per unit of volatility. If you would invest  12,614  in Health Care Select on January 19, 2024 and sell it today you would earn a total of  1,229  from holding Health Care Select or generate 9.74% return on investment over 90 days.

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

Walker Dunlop  vs.  Health Care Select

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.

Health Care Select

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Health Care is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Walker Dunlop and Health Care

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

The idea behind Walker Dunlop and Health Care Select 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.