Correlation Between Vanguard Financials and Dunham International

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

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

Diversification Opportunities for Vanguard Financials and Dunham International

0.74

Correlation Coefficient

Vanguard Financials  Dunham International

Poor diversification

The 3 months correlation between Vanguard and Dunham is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Dunham International Opportuni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham International and Vanguard Financials 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 Vanguard Financials Index 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 Vanguard Financials i.e., Vanguard Financials and Dunham International go up and down completely randomly.

Pair Corralation between Vanguard Financials and Dunham International

Assuming the 90 days horizon Vanguard Financials Index is expected to generate 5.24 times more return on investment than Dunham International. However, Vanguard Financials is 5.24 times more volatile than Dunham International Opportunity. It trades about 0.01 of its potential returns per unit of risk. Dunham International Opportunity is currently generating about 0.02 per unit of risk. If you would invest  5,915  in Vanguard Financials Index on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Vanguard Financials Index or generate 0.07% return on investment over 90 days.

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

Vanguard Financials Index  vs.  Dunham International Opportuni

Vanguard Financials Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Financials Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard Financials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dunham International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham International Opportunity are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dunham International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Financials and Dunham International

The main advantage of trading using opposite Vanguard Financials and Dunham International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Financials 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 Vanguard Financials Index and Dunham International Opportunity 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.