Correlation Between Walker Dunlop and Putnam Equity

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

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

Diversification Opportunities for Walker Dunlop and Putnam Equity

0.8

Correlation Coefficient

Walker Dunlop  Putnam Equity

Very poor diversification

The 3 months correlation between Walker and Putnam is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Putnam Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Equity Income 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 Putnam Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Equity Income has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Putnam Equity go up and down completely randomly.

Pair Corralation between Walker Dunlop and Putnam Equity

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 1.02 times less return on investment than Putnam Equity. In addition to that, Walker Dunlop is 2.59 times more volatile than Putnam Equity Income. It trades about 0.06 of its total potential returns per unit of risk. Putnam Equity Income is currently generating about 0.16 per unit of volatility. If you would invest  3,593  in Putnam Equity Income on August 16, 2024 and sell it today you would earn a total of  233.00  from holding Putnam Equity Income or generate 6.48% return on investment over 90 days.

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

Walker Dunlop  vs.  Putnam Equity Income

Walker Dunlop

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walker Dunlop are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Walker Dunlop may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Putnam Equity Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Equity Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam Equity may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Walker Dunlop and Putnam Equity

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

The idea behind Walker Dunlop and Putnam Equity Income 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.