Correlation Between Dunham Large and Cognios Market

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

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

Diversification Opportunities for Dunham Large and Cognios Market

0.47

Correlation Coefficient

Dunham Large  Cognios Market

Very weak diversification

The 3 months correlation between Dunham and Cognios is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Large Cap and Cognios Market Neutral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognios Market Neutral and Dunham Large 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 Large Cap are associated (or correlated) with Cognios Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognios Market Neutral has no effect on the direction of Dunham Large i.e., Dunham Large and Cognios Market go up and down completely randomly.

Pair Corralation between Dunham Large and Cognios Market

Assuming the 90 days horizon Dunham Large Cap is expected to generate 2.31 times more return on investment than Cognios Market. However, Dunham Large is 2.31 times more volatile than Cognios Market Neutral. It trades about 0.0 of its potential returns per unit of risk. Cognios Market Neutral is currently generating about -0.08 per unit of risk. If you would invest  1,909  in Dunham Large Cap on December 29, 2024 and sell it today you would lose (1.00) from holding Dunham Large Cap or give up 0.05% of portfolio value over 90 days.

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

Dunham Large Cap  vs.  Cognios Market Neutral

Dunham Large Cap

Risk-Adjusted Performance

Very Weak

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

Cognios Market Neutral

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cognios Market Neutral has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Cognios Market 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 Large and Cognios Market

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

The idea behind Dunham Large Cap and Cognios Market Neutral 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.