Correlation Between Dunham Dynamic and Dunham Large

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

Diversification Opportunities for Dunham Dynamic and Dunham Large

0.69

Correlation Coefficient

Dunham Dynamic  Dunham Large

Poor diversification

The 3 months correlation between Dunham and Dunham is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Dynamic Macro and Dunham Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Large Cap has no effect on the direction of Dunham Dynamic i.e., Dunham Dynamic and Dunham Large go up and down completely randomly.

Pair Corralation between Dunham Dynamic and Dunham Large

Assuming the 90 days horizon Dunham Dynamic is expected to generate 20.61 times less return on investment than Dunham Large. But when comparing it to its historical volatility, Dunham Dynamic Macro is 1.61 times less risky than Dunham Large. It trades about 0.01 of its potential returns per unit of risk. Dunham Large Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,011  in Dunham Large Cap on August 30, 2024 and sell it today you would earn a total of  121.00  from holding Dunham Large Cap or generate 6.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Dunham Dynamic Macro  vs.  Dunham Large Cap

Dunham Dynamic Macro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dunham Dynamic Macro has generated negative risk-adjusted returns adding no value to fund investors. 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 Large Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Large Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dunham Large 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 Dynamic and Dunham Large

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

The idea behind Dunham Dynamic Macro and Dunham Large Cap 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.