Correlation Between Dunham Real and Forty Portfolio

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

By analyzing existing cross correlation between Dunham Real Estate and Forty Portfolio Institutional, you can compare the effects of market volatilities on Dunham Real and Forty Portfolio 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 Real with a short position of Forty Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Real and Forty Portfolio.

Diversification Opportunities for Dunham Real and Forty Portfolio

0.91

Correlation Coefficient

Dunham Real  Forty Portfolio

Almost no diversification

The 3 months correlation between Dunham and Forty is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Real Estate and Forty Portfolio Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forty Portfolio Inst and Dunham Real 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 Real Estate are associated (or correlated) with Forty Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forty Portfolio Inst has no effect on the direction of Dunham Real i.e., Dunham Real and Forty Portfolio go up and down completely randomly.

Pair Corralation between Dunham Real and Forty Portfolio

Assuming the 90 days horizon Dunham Real Estate is expected to generate 0.8 times more return on investment than Forty Portfolio. However, Dunham Real Estate is 1.25 times less risky than Forty Portfolio. It trades about -0.07 of its potential returns per unit of risk. Forty Portfolio Institutional is currently generating about -0.07 per unit of risk. If you would invest  1,400  in Dunham Real Estate on December 28, 2024 and sell it today you would lose (72.00) from holding Dunham Real Estate or give up 5.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Dunham Real Estate  vs.  Forty Portfolio Institutional

Dunham Real Estate

Risk-Adjusted Performance

Very Weak

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

Forty Portfolio Inst

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forty Portfolio Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Forty Portfolio 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 Real and Forty Portfolio

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

The idea behind Dunham Real Estate and Forty Portfolio Institutional 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 Global Correlations module to find global opportunities by holding instruments from different markets.