Correlation Between Dunham Focused and Mai Managed

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

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

Diversification Opportunities for Dunham Focused and Mai Managed

0.95

Correlation Coefficient

Dunham Focused  Mai Managed

Almost no diversification

The 3 months correlation between Dunham and Mai is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Focused Large and Mai Managed Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mai Managed Volatility and Dunham Focused 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 Focused Large are associated (or correlated) with Mai Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mai Managed Volatility has no effect on the direction of Dunham Focused i.e., Dunham Focused and Mai Managed go up and down completely randomly.

Pair Corralation between Dunham Focused and Mai Managed

Assuming the 90 days horizon Dunham Focused Large is expected to under-perform the Mai Managed. In addition to that, Dunham Focused is 6.14 times more volatile than Mai Managed Volatility. It trades about -0.02 of its total potential returns per unit of risk. Mai Managed Volatility is currently generating about 0.12 per unit of volatility. If you would invest  1,536  in Mai Managed Volatility on September 29, 2024 and sell it today you would earn a total of  72.00  from holding Mai Managed Volatility or generate 4.69% return on investment over 90 days.

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

Dunham Focused Large  vs.  Mai Managed Volatility

Dunham Focused Large

Risk-Adjusted Performance

0 of 100

OK

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

Mai Managed Volatility

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mai Managed Volatility are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mai Managed 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 Focused and Mai Managed

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

The idea behind Dunham Focused Large and Mai Managed Volatility 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.