Correlation Between Vanguard Small-cap and Dunham Floating

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

By analyzing existing cross correlation between Vanguard Small Cap Growth and Dunham Floating Rate, you can compare the effects of market volatilities on Vanguard Small-cap and Dunham Floating 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 Small-cap with a short position of Dunham Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Dunham Floating.

Diversification Opportunities for Vanguard Small-cap and Dunham Floating

0.2

Correlation Coefficient

Vanguard Small-cap  Dunham Floating

Modest diversification

The 3 months correlation between Vanguard and Dunham is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Dunham Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Floating Rate and Vanguard Small-cap 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 Small Cap Growth are associated (or correlated) with Dunham Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Floating Rate has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Dunham Floating go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Dunham Floating

Assuming the 90 days horizon Vanguard Small Cap Growth is expected to under-perform the Dunham Floating. In addition to that, Vanguard Small-cap is 13.75 times more volatile than Dunham Floating Rate. It trades about -0.11 of its total potential returns per unit of risk. Dunham Floating Rate is currently generating about 0.06 per unit of volatility. If you would invest  855.00  in Dunham Floating Rate on December 30, 2024 and sell it today you would earn a total of  3.00  from holding Dunham Floating Rate or generate 0.35% return on investment over 90 days.

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

Vanguard Small Cap Growth  vs.  Dunham Floating Rate

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Growth 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.

Dunham Floating Rate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Floating Rate are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dunham Floating 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 Small-cap and Dunham Floating

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

The idea behind Vanguard Small Cap Growth and Dunham Floating Rate 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.