Correlation Between Dunham High and Thornburg Low

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

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

Diversification Opportunities for Dunham High and Thornburg Low

0.45

Correlation Coefficient

Dunham High  Thornburg Low

Very weak diversification

The 3 months correlation between DUNHAM and Thornburg is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dunham High Yield and Thornburg Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Low Duration and Dunham High 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 High Yield are associated (or correlated) with Thornburg Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Low Duration has no effect on the direction of Dunham High i.e., Dunham High and Thornburg Low go up and down completely randomly.

Pair Corralation between Dunham High and Thornburg Low

Assuming the 90 days horizon Dunham High is expected to generate 1.34 times less return on investment than Thornburg Low. In addition to that, Dunham High is 1.79 times more volatile than Thornburg Low Duration. It trades about 0.08 of its total potential returns per unit of risk. Thornburg Low Duration is currently generating about 0.2 per unit of volatility. If you would invest  1,206  in Thornburg Low Duration on December 21, 2024 and sell it today you would earn a total of  15.00  from holding Thornburg Low Duration or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Dunham High Yield  vs.  Thornburg Low Duration

Dunham High Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham High Yield are ranked lower than 6 (%) 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.

Thornburg Low Duration

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Low Duration are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Thornburg Low 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 High and Thornburg Low

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

The idea behind Dunham High Yield and Thornburg Low Duration 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.