Correlation Between Thornburg Low and Dunham High

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

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

Diversification Opportunities for Thornburg Low and Dunham High

0.45

Correlation Coefficient

Thornburg Low  Dunham High

Very weak diversification

The 3 months correlation between Thornburg and DUNHAM is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg Low Duration 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 Thornburg Low 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 Thornburg Low Duration 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 Thornburg Low i.e., Thornburg Low and Dunham High go up and down completely randomly.

Pair Corralation between Thornburg Low and Dunham High

Assuming the 90 days horizon Thornburg Low Duration is expected to generate 0.56 times more return on investment than Dunham High. However, Thornburg Low Duration is 1.79 times less risky than Dunham High. It trades about 0.2 of its potential returns per unit of risk. Dunham High Yield is currently generating about 0.08 per unit of risk. If you would invest  1,206  in Thornburg Low Duration on December 21, 2024 and sell it today you would earn a total of  15.00  from holding Thornburg Low Duration or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Thornburg Low Duration  vs.  Dunham High Yield

Thornburg Low Duration

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Low Duration are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Thornburg Low 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham High Yield are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. 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 Thornburg Low and Dunham High

The main advantage of trading using opposite Thornburg Low and Dunham High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thornburg Low 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 Thornburg Low Duration 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.