Correlation Between Novan and Walker Dunlop

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

Diversification Opportunities for Novan and Walker Dunlop

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Novan and Walker is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Novan Inc and Walker Dunlop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walker Dunlop and Novan 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 Novan Inc 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 Novan i.e., Novan and Walker Dunlop go up and down completely randomly.

Pair Corralation between Novan and Walker Dunlop

Given the investment horizon of 90 days Novan Inc is expected to generate 1.74 times more return on investment than Walker Dunlop. However, Novan is 1.74 times more volatile than Walker Dunlop. It trades about 0.35 of its potential returns per unit of risk. Walker Dunlop is currently generating about 0.39 per unit of risk. If you would invest  242.00  in Novan Inc on May 16, 2022 and sell it today you would earn a total of  61.00  from holding Novan Inc or generate 25.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Novan Inc  vs.  Walker Dunlop

 Performance (%) 
       Timeline  
Novan Inc 
Novan Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Novan Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish basic indicators, Novan disclosed solid returns over the last few months and may actually be approaching a breakup point.

Novan Price Channel

Walker Dunlop 
Walker Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walker Dunlop are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Walker Dunlop exhibited solid returns over the last few months and may actually be approaching a breakup point.

Walker Price Channel

Novan and Walker Dunlop Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Novan and Walker Dunlop

The main advantage of trading using opposite Novan and Walker Dunlop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novan 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.

Novan Inc

Pair trading matchups for Novan

The idea behind Novan Inc 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.

Walker Dunlop

Pair trading matchups for Walker Dunlop

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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