Correlation Between Dunham High and Fidelity Europe

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

By analyzing existing cross correlation between Dunham High Yield and Fidelity Europe Fund, you can compare the effects of market volatilities on Dunham High and Fidelity Europe 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 High with a short position of Fidelity Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham High and Fidelity Europe.

Diversification Opportunities for Dunham High and Fidelity Europe

-0.25

Correlation Coefficient

Dunham High  Fidelity Europe

Very good diversification

The 3 months correlation between Dunham and Fidelity is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dunham High Yield and Fidelity Europe Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Europe and Dunham High 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 High Yield are associated (or correlated) with Fidelity Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Europe has no effect on the direction of Dunham High i.e., Dunham High and Fidelity Europe go up and down completely randomly.

Pair Corralation between Dunham High and Fidelity Europe

Assuming the 90 days horizon Dunham High is expected to generate 2.26 times less return on investment than Fidelity Europe. But when comparing it to its historical volatility, Dunham High Yield is 3.63 times less risky than Fidelity Europe. It trades about 0.3 of its potential returns per unit of risk. Fidelity Europe Fund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,462  in Fidelity Europe Fund on October 23, 2024 and sell it today you would earn a total of  80.00  from holding Fidelity Europe Fund or generate 2.31% return on investment over 90 days.

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

Dunham High Yield  vs.  Fidelity Europe Fund

Dunham High Yield

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham High Yield are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dunham High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Europe Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Europe 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 High and Fidelity Europe

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

The idea behind Dunham High Yield and Fidelity Europe Fund 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.