Correlation Between Walker Dunlop and Nestle SA

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

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

Diversification Opportunities for Walker Dunlop and Nestle SA

0.16

Correlation Coefficient

Walker Dunlop  Nestle SA

Average diversification

The 3 months correlation between Walker and Nestle is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Nestle SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle SA 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 Nestle SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle SA has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Nestle SA go up and down completely randomly.

Pair Corralation between Walker Dunlop and Nestle SA

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 1.5 times more return on investment than Nestle SA. However, Walker Dunlop is 1.5 times more volatile than Nestle SA. It trades about 0.03 of its potential returns per unit of risk. Nestle SA is currently generating about -0.11 per unit of risk. If you would invest  9,176  in Walker Dunlop on February 3, 2024 and sell it today you would earn a total of  247.00  from holding Walker Dunlop or generate 2.69% return on investment over 90 days.

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

Walker Dunlop  vs.  Nestle SA

Walker Dunlop

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Walker Dunlop are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Walker Dunlop is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nestle SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestle SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Walker Dunlop and Nestle SA

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

The idea behind Walker Dunlop and Nestle SA 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.