Correlation Between Dunham Dynamic and Dunham Focused

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

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

Diversification Opportunities for Dunham Dynamic and Dunham Focused

0.79

Correlation Coefficient

Dunham Dynamic  Dunham Focused

Poor diversification

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

Pair Corralation between Dunham Dynamic and Dunham Focused

Assuming the 90 days horizon Dunham Dynamic Macro is expected to generate 0.11 times more return on investment than Dunham Focused. However, Dunham Dynamic Macro is 8.96 times less risky than Dunham Focused. It trades about 0.03 of its potential returns per unit of risk. Dunham Focused Large is currently generating about -0.14 per unit of risk. If you would invest  1,195  in Dunham Dynamic Macro on December 29, 2024 and sell it today you would earn a total of  3.00  from holding Dunham Dynamic Macro or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Dunham Dynamic Macro  vs.  Dunham Focused Large

Dunham Dynamic Macro

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Dynamic Macro are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dunham Dynamic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dunham Focused Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dunham Focused Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Dunham Dynamic and Dunham Focused

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

The idea behind Dunham Dynamic Macro and Dunham Focused Large 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.