Correlation Between Short Precious and Dunham Focused

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

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

Diversification Opportunities for Short Precious and Dunham Focused

0.67

Correlation Coefficient

Short Precious  Dunham Focused

Poor diversification

The 3 months correlation between Short and Dunham is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Short Precious Metals 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 Short Precious 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 Short Precious Metals 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 Short Precious i.e., Short Precious and Dunham Focused go up and down completely randomly.

Pair Corralation between Short Precious and Dunham Focused

Assuming the 90 days horizon Short Precious Metals is expected to under-perform the Dunham Focused. In addition to that, Short Precious is 1.2 times more volatile than Dunham Focused Large. It trades about -0.26 of its total potential returns per unit of risk. Dunham Focused Large is currently generating about -0.11 per unit of volatility. If you would invest  3,944  in Dunham Focused Large on December 28, 2024 and sell it today you would lose (389.00) from holding Dunham Focused Large or give up 9.86% of portfolio value over 90 days.

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

Short Precious Metals  vs.  Dunham Focused Large

Short Precious Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Short Precious Metals has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Dunham Focused Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dunham Focused Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Short Precious and Dunham Focused

The main advantage of trading using opposite Short Precious and Dunham Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Precious 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 Short Precious Metals 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.