Correlation Between Dunham Focused and Red Oak

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

Diversification Opportunities for Dunham Focused and Red Oak

0.79

Correlation Coefficient

Dunham Focused  Red Oak

Poor diversification

The 3 months correlation between Dunham and Red is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Focused Large and Red Oak Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Oak Technology 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 Red Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Oak Technology has no effect on the direction of Dunham Focused i.e., Dunham Focused and Red Oak go up and down completely randomly.

Pair Corralation between Dunham Focused and Red Oak

Assuming the 90 days horizon Dunham Focused Large is expected to generate 0.96 times more return on investment than Red Oak. However, Dunham Focused Large is 1.04 times less risky than Red Oak. It trades about 0.14 of its potential returns per unit of risk. Red Oak Technology is currently generating about 0.09 per unit of risk. If you would invest  3,831  in Dunham Focused Large on September 26, 2024 and sell it today you would earn a total of  269.00  from holding Dunham Focused Large or generate 7.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Dunham Focused Large  vs.  Red Oak Technology

Dunham Focused Large

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Focused Large are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dunham Focused may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Red Oak Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Red Oak Technology are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Red Oak 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 Red Oak

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

The idea behind Dunham Focused Large and Red Oak Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.