Correlation Between Dunham Monthly and Dunham High

Can any of the company-specific risk be diversified away by investing in both Dunham Monthly 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 Monthly 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 Monthly Distribution and Dunham High Yield, you can compare the effects of market volatilities on Dunham Monthly 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 Monthly with a short position of Dunham High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Monthly and Dunham High.

Diversification Opportunities for Dunham Monthly and Dunham High

0.49

Correlation Coefficient

Dunham Monthly  Dunham High

Very weak diversification

The 3 months correlation between Dunham and Dunham is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Monthly Distribution 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 Monthly 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 Monthly Distribution 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 Monthly i.e., Dunham Monthly and Dunham High go up and down completely randomly.

Pair Corralation between Dunham Monthly and Dunham High

Assuming the 90 days horizon Dunham Monthly Distribution is expected to generate 0.5 times more return on investment than Dunham High. However, Dunham Monthly Distribution is 1.98 times less risky than Dunham High. It trades about 0.24 of its potential returns per unit of risk. Dunham High Yield is currently generating about 0.01 per unit of risk. If you would invest  2,843  in Dunham Monthly Distribution on December 29, 2024 and sell it today you would earn a total of  43.00  from holding Dunham Monthly Distribution or generate 1.51% return on investment over 90 days.

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

Dunham Monthly Distribution  vs.  Dunham High Yield

Dunham Monthly Distr

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Monthly Distribution are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Dunham Monthly 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

Very Weak

Over the last 90 days Dunham High Yield has generated negative risk-adjusted returns adding no value to fund investors. 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 Monthly and Dunham High

The main advantage of trading using opposite Dunham Monthly and Dunham High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dunham Monthly 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 Monthly Distribution 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.