Correlation Between Walker Dunlop and McCormick Company

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

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

Diversification Opportunities for Walker Dunlop and McCormick Company

0.18

Correlation Coefficient

Walker Dunlop  McCormick Company

Average diversification

The 3 months correlation between Walker and McCormick is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick Company 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 McCormick Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McCormick Company has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and McCormick Company go up and down completely randomly.

Pair Corralation between Walker Dunlop and McCormick Company

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 1.5 times more return on investment than McCormick Company. However, Walker Dunlop is 1.5 times more volatile than McCormick Company Incorporated. It trades about -0.01 of its potential returns per unit of risk. McCormick Company Incorporated is currently generating about -0.04 per unit of risk. If you would invest  9,493  in Walker Dunlop on February 3, 2024 and sell it today you would lose (70.00) from holding Walker Dunlop or give up 0.74% of portfolio value over 90 days.

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

Walker Dunlop  vs.  McCormick Company Incorporated

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.

McCormick Company

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McCormick Company Incorporated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking signals, McCormick Company exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walker Dunlop and McCormick Company

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

The idea behind Walker Dunlop and McCormick Company Incorporated 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.