Correlation Between Dunham Real and Mid-cap Value

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

Diversification Opportunities for Dunham Real and Mid-cap Value

0.24

Correlation Coefficient

Dunham Real  Mid-cap Value

Modest diversification

The 3 months correlation between Dunham and Mid-cap is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Real Estate and Mid Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value 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 Mid-cap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Dunham Real i.e., Dunham Real and Mid-cap Value go up and down completely randomly.

Pair Corralation between Dunham Real and Mid-cap Value

Assuming the 90 days horizon Dunham Real is expected to generate 1.96 times less return on investment than Mid-cap Value. But when comparing it to its historical volatility, Dunham Real Estate is 1.19 times less risky than Mid-cap Value. It trades about 0.11 of its potential returns per unit of risk. Mid Cap Value Profund is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  10,965  in Mid Cap Value Profund on September 2, 2024 and sell it today you would earn a total of  1,290  from holding Mid Cap Value Profund or generate 11.76% return on investment over 90 days.

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

Dunham Real Estate  vs.  Mid Cap Value Profund

Dunham Real Estate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Real Estate are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. 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.

Mid Cap Value

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value Profund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mid-cap Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dunham Real and Mid-cap Value

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

The idea behind Dunham Real Estate and Mid Cap Value Profund 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.