Correlation Between McDonalds Corp and Walker Dunlop

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Can any of the company-specific risk be diversified away by investing in both McDonalds Corp and Walker Dunlop 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 McDonalds Corp and Walker Dunlop into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds Corp and Walker Dunlop, you can compare the effects of market volatilities on McDonalds Corp and Walker Dunlop 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 McDonalds Corp with a short position of Walker Dunlop. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds Corp and Walker Dunlop.

Diversification Opportunities for McDonalds Corp and Walker Dunlop

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between McDonalds and Walker is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds Corp and Walker Dunlop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walker Dunlop and McDonalds Corp 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 McDonalds Corp are associated (or correlated) with Walker Dunlop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walker Dunlop has no effect on the direction of McDonalds Corp i.e., McDonalds Corp and Walker Dunlop go up and down completely randomly.

Pair Corralation between McDonalds Corp and Walker Dunlop

Considering the 90-day investment horizon McDonalds Corp is expected to generate 0.24 times more return on investment than Walker Dunlop. However, McDonalds Corp is 4.19 times less risky than Walker Dunlop. It trades about 0.01 of its potential returns per unit of risk. Walker Dunlop is currently generating about -0.06 per unit of risk. If you would invest  27,266  in McDonalds Corp on August 31, 2022 and sell it today you would earn a total of  22.00  from holding McDonalds Corp or generate 0.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

McDonalds Corp  vs.  Walker Dunlop

 Performance (%) 
       Timeline  
McDonalds Corp 
McDonalds Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, McDonalds Corp may actually be approaching a critical reversion point that can send shares even higher in December 2022.

McDonalds Price Channel

Walker Dunlop 
Walker Performance
0 of 100
Over the last 90 days Walker Dunlop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in December 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Walker Price Channel

McDonalds Corp and Walker Dunlop Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds Corp and Walker Dunlop

The main advantage of trading using opposite McDonalds Corp and Walker Dunlop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds Corp position performs unexpectedly, Walker Dunlop 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 Walker Dunlop will offset losses from the drop in Walker Dunlop's long position.
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The idea behind McDonalds Corp and Walker Dunlop 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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