Correlation Between Tax Managed and Dunham Enhanced

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

By analyzing existing cross correlation between Tax Managed Mid Small and Dunham Enhanced Market, you can compare the effects of market volatilities on Tax Managed and Dunham Enhanced 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 Tax Managed with a short position of Dunham Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax Managed and Dunham Enhanced.

Diversification Opportunities for Tax Managed and Dunham Enhanced

0.94

Correlation Coefficient

Tax Managed  Dunham Enhanced

Almost no diversification

The 3 months correlation between Tax and Dunham is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Mid Small and Dunham Enhanced Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Enhanced Market and Tax Managed 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 Tax Managed Mid Small are associated (or correlated) with Dunham Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Enhanced Market has no effect on the direction of Tax Managed i.e., Tax Managed and Dunham Enhanced go up and down completely randomly.

Pair Corralation between Tax Managed and Dunham Enhanced

Assuming the 90 days horizon Tax Managed Mid Small is expected to generate 1.36 times more return on investment than Dunham Enhanced. However, Tax Managed is 1.36 times more volatile than Dunham Enhanced Market. It trades about 0.15 of its potential returns per unit of risk. Dunham Enhanced Market is currently generating about 0.19 per unit of risk. If you would invest  4,077  in Tax Managed Mid Small on September 12, 2024 and sell it today you would earn a total of  410.00  from holding Tax Managed Mid Small or generate 10.06% return on investment over 90 days.

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

Tax Managed Mid Small  vs.  Dunham Enhanced Market

Tax Managed Mid

Risk-Adjusted Performance

11 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed Mid Small are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Tax Managed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dunham Enhanced Market

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Enhanced Market 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 Enhanced may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tax Managed and Dunham Enhanced

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

The idea behind Tax Managed Mid Small and Dunham Enhanced Market 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .