Correlation Between Walker Dunlop and Bengal Energy

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

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

Diversification Opportunities for Walker Dunlop and Bengal Energy

-0.42

Correlation Coefficient

Walker Dunlop  Bengal Energy

Very good diversification

The 3 months correlation between Walker and Bengal is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Bengal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bengal Energy 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 Bengal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bengal Energy has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Bengal Energy go up and down completely randomly.

Pair Corralation between Walker Dunlop and Bengal Energy

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 0.12 times more return on investment than Bengal Energy. However, Walker Dunlop is 8.03 times less risky than Bengal Energy. It trades about -0.16 of its potential returns per unit of risk. Bengal Energy is currently generating about -0.29 per unit of risk. If you would invest  11,429  in Walker Dunlop on August 25, 2024 and sell it today you would lose (580.00) from holding Walker Dunlop or give up 5.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Walker Dunlop  vs.  Bengal Energy

Walker Dunlop

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Walker Dunlop are ranked lower than 1 (%) 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.

Bengal Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bengal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Walker Dunlop and Bengal Energy

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

The idea behind Walker Dunlop and Bengal Energy 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.