Correlation Between Columbia and Dunham Emerging

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

By analyzing existing cross correlation between Columbia Treasury Index and Dunham Emerging Markets, you can compare the effects of market volatilities on Columbia and Dunham Emerging 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 Columbia with a short position of Dunham Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia and Dunham Emerging.

Diversification Opportunities for Columbia and Dunham Emerging

0.73

Correlation Coefficient

Columbia  Dunham Emerging

Poor diversification

The 3 months correlation between Columbia and Dunham is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Treasury Index and Dunham Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Emerging Markets and Columbia 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 Columbia Treasury Index are associated (or correlated) with Dunham Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Emerging Markets has no effect on the direction of Columbia i.e., Columbia and Dunham Emerging go up and down completely randomly.

Pair Corralation between Columbia and Dunham Emerging

Assuming the 90 days horizon Columbia is expected to generate 23.22 times less return on investment than Dunham Emerging. But when comparing it to its historical volatility, Columbia Treasury Index is 2.79 times less risky than Dunham Emerging. It trades about 0.01 of its potential returns per unit of risk. Dunham Emerging Markets is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,258  in Dunham Emerging Markets on October 9, 2024 and sell it today you would earn a total of  122.00  from holding Dunham Emerging Markets or generate 9.7% return on investment over 90 days.

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

Columbia Treasury Index  vs.  Dunham Emerging Markets

Columbia Treasury Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Treasury Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dunham Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dunham Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Dunham Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Columbia and Dunham Emerging

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

The idea behind Columbia Treasury Index and Dunham Emerging Markets 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.