Correlation Between Pacific Capital and Dunham High

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

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

Diversification Opportunities for Pacific Capital and Dunham High

0.51

Correlation Coefficient

Pacific Capital  Dunham High

Very weak diversification

The 3 months correlation between Pacific and Dunham is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Capital Tax Free 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 Pacific Capital 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 Pacific Capital Tax Free 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 Pacific Capital i.e., Pacific Capital and Dunham High go up and down completely randomly.

Pair Corralation between Pacific Capital and Dunham High

Assuming the 90 days horizon Pacific Capital Tax Free is expected to generate 0.64 times more return on investment than Dunham High. However, Pacific Capital Tax Free is 1.56 times less risky than Dunham High. It trades about -0.3 of its potential returns per unit of risk. Dunham High Yield is currently generating about -0.3 per unit of risk. If you would invest  979.00  in Pacific Capital Tax Free on October 12, 2024 and sell it today you would lose (10.00) from holding Pacific Capital Tax Free or give up 1.02% of portfolio value over 90 days.

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

Pacific Capital Tax Free  vs.  Dunham High Yield

Pacific Capital Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Capital Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pacific Capital 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

0 of 100

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 Pacific Capital and Dunham High

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

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.