Correlation Between Dunham Large and Fundamental Large

Can any of the company-specific risk be diversified away by investing in both Dunham Large and Fundamental Large 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 Fundamental Large 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 Fundamental Large Cap, you can compare the effects of market volatilities on Dunham Large and Fundamental Large 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 Fundamental Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Large and Fundamental Large.

Diversification Opportunities for Dunham Large and Fundamental Large

0.81

Correlation Coefficient

Dunham Large  Fundamental Large

Very poor diversification

The 3 months correlation between Dunham and Fundamental is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Large Cap and Fundamental Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Large Cap 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 Fundamental Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Large Cap has no effect on the direction of Dunham Large i.e., Dunham Large and Fundamental Large go up and down completely randomly.

Pair Corralation between Dunham Large and Fundamental Large

Assuming the 90 days horizon Dunham Large Cap is expected to generate 0.63 times more return on investment than Fundamental Large. However, Dunham Large Cap is 1.58 times less risky than Fundamental Large. It trades about -0.1 of its potential returns per unit of risk. Fundamental Large Cap is currently generating about -0.14 per unit of risk. If you would invest  2,112  in Dunham Large Cap on December 2, 2024 and sell it today you would lose (126.00) from holding Dunham Large Cap or give up 5.97% of portfolio value over 90 days.

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

Dunham Large Cap  vs.  Fundamental Large Cap

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.

Fundamental Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Large Cap 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 basic 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.

Pair Trading with Dunham Large and Fundamental Large

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

The idea behind Dunham Large Cap and Fundamental Large Cap 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.