Correlation Between Dunham Floating and Dunham High

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

By analyzing existing cross correlation between Dunham Floating Rate and Dunham High Yield, you can compare the effects of market volatilities on Dunham Floating and Dunham High 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 Floating with a short position of Dunham High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Floating and Dunham High.

Diversification Opportunities for Dunham Floating and Dunham High

0.83

Correlation Coefficient

Dunham Floating  Dunham High

Very poor diversification

The 3 months correlation between Dunham and Dunham is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Floating Rate and Dunham High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham High Yield and Dunham Floating 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 Floating Rate are associated (or correlated) with Dunham High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham High Yield has no effect on the direction of Dunham Floating i.e., Dunham Floating and Dunham High go up and down completely randomly.

Pair Corralation between Dunham Floating and Dunham High

Assuming the 90 days horizon Dunham Floating Rate is expected to generate 0.42 times more return on investment than Dunham High. However, Dunham Floating Rate is 2.36 times less risky than Dunham High. It trades about 0.32 of its potential returns per unit of risk. Dunham High Yield is currently generating about 0.13 per unit of risk. If you would invest  857.00  in Dunham Floating Rate on November 28, 2024 and sell it today you would earn a total of  12.00  from holding Dunham Floating Rate or generate 1.4% return on investment over 90 days.

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

Dunham Floating Rate  vs.  Dunham High Yield

Dunham Floating Rate

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Floating Rate are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dunham Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dunham High Yield

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham High Yield are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dunham High 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 Floating and Dunham High

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

The idea behind Dunham Floating Rate and Dunham High Yield 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.