Correlation Between GM and Dunham Focused

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

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

Diversification Opportunities for GM and Dunham Focused

0.84

Correlation Coefficient

GM  Dunham Focused

Very poor diversification

The 3 months correlation between GM and Dunham is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Dunham Focused go up and down completely randomly.

Pair Corralation between GM and Dunham Focused

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.46 times more return on investment than Dunham Focused. However, GM is 2.46 times more volatile than Dunham Focused Large. It trades about 0.1 of its potential returns per unit of risk. Dunham Focused Large is currently generating about 0.19 per unit of risk. If you would invest  4,829  in General Motors on August 31, 2024 and sell it today you would earn a total of  721.00  from holding General Motors or generate 14.93% return on investment over 90 days.

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

General Motors  vs.  Dunham Focused Large

General Motors

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Dunham Focused Large

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Focused Large are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dunham Focused may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with GM and Dunham Focused

The main advantage of trading using opposite GM and Dunham Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.