Correlation Between Dunham Porategovernment and Pace International

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

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

Diversification Opportunities for Dunham Porategovernment and Pace International

0.71

Correlation Coefficient

Dunham Porategovernment  Pace International

Poor diversification

The 3 months correlation between Dunham and Pace is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Porategovernment Bond and Pace International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace International Equity and Dunham Porategovernment 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 Dunham Porategovernment Bond are associated (or correlated) with Pace International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace International Equity has no effect on the direction of Dunham Porategovernment i.e., Dunham Porategovernment and Pace International go up and down completely randomly.

Pair Corralation between Dunham Porategovernment and Pace International

Assuming the 90 days horizon Dunham Porategovernment Bond is expected to generate 0.09 times more return on investment than Pace International. However, Dunham Porategovernment Bond is 11.24 times less risky than Pace International. It trades about -0.26 of its potential returns per unit of risk. Pace International Equity is currently generating about -0.23 per unit of risk. If you would invest  1,260  in Dunham Porategovernment Bond on September 27, 2024 and sell it today you would lose (16.00) from holding Dunham Porategovernment Bond or give up 1.27% of portfolio value over 90 days.

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

Dunham Porategovernment Bond  vs.  Pace International Equity

Dunham Porategovernment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pace International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pace International Equity 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 basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Dunham Porategovernment and Pace International

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

The idea behind Dunham Porategovernment Bond and Pace International Equity 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.