Correlation Between Dunham Focused and Dunham Real

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

By analyzing existing cross correlation between Dunham Focused Large and Dunham Real Estate, you can compare the effects of market volatilities on Dunham Focused and Dunham Real 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 Dunham Focused with a short position of Dunham Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Focused and Dunham Real.

Diversification Opportunities for Dunham Focused and Dunham Real

0.74

Correlation Coefficient

Dunham Focused  Dunham Real

Poor diversification

The 3 months correlation between Dunham and Dunham is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Focused Large and Dunham Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Real Estate and Dunham Focused 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 Dunham Focused Large are associated (or correlated) with Dunham Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Real Estate has no effect on the direction of Dunham Focused i.e., Dunham Focused and Dunham Real go up and down completely randomly.

Pair Corralation between Dunham Focused and Dunham Real

Assuming the 90 days horizon Dunham Focused Large is expected to under-perform the Dunham Real. In addition to that, Dunham Focused is 1.36 times more volatile than Dunham Real Estate. It trades about -0.14 of its total potential returns per unit of risk. Dunham Real Estate is currently generating about -0.07 per unit of volatility. If you would invest  1,400  in Dunham Real Estate on December 29, 2024 and sell it today you would lose (72.00) from holding Dunham Real Estate or give up 5.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Dunham Focused Large  vs.  Dunham Real Estate

Dunham Focused Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dunham Focused Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Dunham Real Estate

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dunham Focused and Dunham Real

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

The idea behind Dunham Focused Large and Dunham Real Estate 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.