Correlation Between Dunham Floating and Vanguard Small-cap

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

By analyzing existing cross correlation between Dunham Floating Rate and Vanguard Small Cap Growth, you can compare the effects of market volatilities on Dunham Floating and Vanguard Small-cap 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 Floating with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Floating and Vanguard Small-cap.

Diversification Opportunities for Dunham Floating and Vanguard Small-cap

-0.08

Correlation Coefficient

Dunham Floating  Vanguard Small-cap

Good diversification

The 3 months correlation between Dunham and Vanguard is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Floating Rate and Vanguard Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Dunham Floating 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 Floating Rate are associated (or correlated) with Vanguard Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Dunham Floating i.e., Dunham Floating and Vanguard Small-cap go up and down completely randomly.

Pair Corralation between Dunham Floating and Vanguard Small-cap

Assuming the 90 days horizon Dunham Floating Rate is expected to generate 0.06 times more return on investment than Vanguard Small-cap. However, Dunham Floating Rate is 15.9 times less risky than Vanguard Small-cap. It trades about 0.38 of its potential returns per unit of risk. Vanguard Small Cap Growth is currently generating about -0.12 per unit of risk. If you would invest  856.00  in Dunham Floating Rate on November 29, 2024 and sell it today you would earn a total of  14.00  from holding Dunham Floating Rate or generate 1.64% return on investment over 90 days.

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

Dunham Floating Rate  vs.  Vanguard Small Cap Growth

Dunham Floating Rate

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Floating Rate are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dunham Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Dunham Floating and Vanguard Small-cap

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

The idea behind Dunham Floating Rate and Vanguard Small Cap Growth 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.