Correlation Between Walker Dunlop and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Walker Dunlop and Caterpillar 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 Caterpillar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walker Dunlop and Caterpillar, you can compare the effects of market volatilities on Walker Dunlop and Caterpillar 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 Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walker Dunlop and Caterpillar.
Diversification Opportunities for Walker Dunlop and Caterpillar
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walker and Caterpillar is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar 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 Caterpillar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caterpillar has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Caterpillar go up and down completely randomly.
Pair Corralation between Walker Dunlop and Caterpillar
Allowing for the 90-day total investment horizon Walker Dunlop is expected to under-perform the Caterpillar. But the stock apears to be less risky and, when comparing its historical volatility, Walker Dunlop is 1.79 times less risky than Caterpillar. The stock trades about -0.08 of its potential returns per unit of risk. The Caterpillar is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 39,061 in Caterpillar on August 27, 2024 and sell it today you would earn a total of 688.00 from holding Caterpillar or generate 1.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walker Dunlop vs. Caterpillar
Performance |
| Timeline |
| Walker Dunlop |
| Caterpillar |
Walker Dunlop and Caterpillar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walker Dunlop and Caterpillar
The main advantage of trading using opposite Walker Dunlop and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walker Dunlop position performs unexpectedly, Caterpillar 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 Caterpillar will offset losses from the drop in Caterpillar's long position.| Walker Dunlop vs. Mr Cooper Group | Walker Dunlop vs. Velocity Financial Llc | Walker Dunlop vs. Security National Financial | Walker Dunlop vs. Encore Capital Group |
| Caterpillar vs. Lion Electric Corp | Caterpillar vs. Xos Inc | Caterpillar vs. Hydrofarm Holdings Group | Caterpillar vs. AGCO Corporation |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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