Correlation Between Dunham Large and Intermediate Term

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

Diversification Opportunities for Dunham Large and Intermediate Term

0.11

Correlation Coefficient

Dunham Large  Intermediate Term

Average diversification

The 3 months correlation between Dunham and Intermediate is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Large Cap and Intermediate Term Tax Free Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Tax 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 Intermediate Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Tax has no effect on the direction of Dunham Large i.e., Dunham Large and Intermediate Term go up and down completely randomly.

Pair Corralation between Dunham Large and Intermediate Term

Assuming the 90 days horizon Dunham Large Cap is expected to under-perform the Intermediate Term. In addition to that, Dunham Large is 3.12 times more volatile than Intermediate Term Tax Free Bond. It trades about -0.37 of its total potential returns per unit of risk. Intermediate Term Tax Free Bond is currently generating about -0.18 per unit of volatility. If you would invest  1,078  in Intermediate Term Tax Free Bond on September 23, 2024 and sell it today you would lose (9.00) from holding Intermediate Term Tax Free Bond or give up 0.83% of portfolio value over 90 days.

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

Dunham Large Cap  vs.  Intermediate Term Tax Free Bon

Dunham Large Cap

Risk-Adjusted Performance

0 of 100

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.

Intermediate Term Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Term Tax Free Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Intermediate Term 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 Intermediate Term

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

The idea behind Dunham Large Cap and Intermediate Term Tax Free Bond 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.