Correlation Between Walker Dunlop and Armstrong Flooring

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

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

Diversification Opportunities for Walker Dunlop and Armstrong Flooring

0.37

Correlation Coefficient

Walker Dunlop  Armstrong Flooring

Weak diversification

The 3 months correlation between Walker and Armstrong is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Armstrong Flooring in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong Flooring 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 Armstrong Flooring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong Flooring has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Armstrong Flooring go up and down completely randomly.

Pair Corralation between Walker Dunlop and Armstrong Flooring

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 97.55 times less return on investment than Armstrong Flooring. But when comparing it to its historical volatility, Walker Dunlop is 9.71 times less risky than Armstrong Flooring. It trades about 0.01 of its potential returns per unit of risk. Armstrong Flooring is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  34.00  in Armstrong Flooring on February 3, 2024 and sell it today you would earn a total of  1.00  from holding Armstrong Flooring or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.21%
Values	Daily Returns

Walker Dunlop  vs.  Armstrong Flooring

Walker Dunlop

Risk-Adjusted Performance

2 of 100

Very 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Armstrong Flooring

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armstrong Flooring has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Armstrong Flooring is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Walker Dunlop and Armstrong Flooring

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

The idea behind Walker Dunlop and Armstrong Flooring 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.