Correlation Between Microsoft and Dunham International

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

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

Diversification Opportunities for Microsoft and Dunham International

-0.61

Correlation Coefficient

Microsoft  Dunham International

Excellent diversification

The 3 months correlation between Microsoft and Dunham is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Dunham International Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham International and Microsoft 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 Microsoft are associated (or correlated) with Dunham International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham International has no effect on the direction of Microsoft i.e., Microsoft and Dunham International go up and down completely randomly.

Pair Corralation between Microsoft and Dunham International

Given the investment horizon of 90 days Microsoft is expected to under-perform the Dunham International. In addition to that, Microsoft is 1.88 times more volatile than Dunham International Stock. It trades about -0.11 of its total potential returns per unit of risk. Dunham International Stock is currently generating about 0.19 per unit of volatility. If you would invest  1,639  in Dunham International Stock on December 30, 2024 and sell it today you would earn a total of  172.00  from holding Dunham International Stock or generate 10.49% return on investment over 90 days.

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

Microsoft  vs.  Dunham International Stock

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Dunham International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham International Stock are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dunham International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Microsoft and Dunham International

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

The idea behind Microsoft and Dunham International Stock 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.