Correlation Between Dunham Porategovernment and Thornburg Limited

Can any of the company-specific risk be diversified away by investing in both Dunham Porategovernment and Thornburg Limited 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 Thornburg Limited 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 Thornburg Limited Term, you can compare the effects of market volatilities on Dunham Porategovernment and Thornburg Limited 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 Thornburg Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Porategovernment and Thornburg Limited.

Diversification Opportunities for Dunham Porategovernment and Thornburg Limited

0.93

Correlation Coefficient

Dunham Porategovernment  Thornburg Limited

Almost no diversification

The 3 months correlation between Dunham and Thornburg is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Porategovernment Bond and Thornburg Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Limited Term 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 Thornburg Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Limited Term has no effect on the direction of Dunham Porategovernment i.e., Dunham Porategovernment and Thornburg Limited go up and down completely randomly.

Pair Corralation between Dunham Porategovernment and Thornburg Limited

Assuming the 90 days horizon Dunham Porategovernment Bond is expected to under-perform the Thornburg Limited. In addition to that, Dunham Porategovernment is 1.61 times more volatile than Thornburg Limited Term. It trades about -0.18 of its total potential returns per unit of risk. Thornburg Limited Term is currently generating about -0.16 per unit of volatility. If you would invest  1,308  in Thornburg Limited Term on September 27, 2024 and sell it today you would lose (22.00) from holding Thornburg Limited Term or give up 1.68% of portfolio value over 90 days.

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

Dunham Porategovernment Bond  vs.  Thornburg Limited Term

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.

Thornburg Limited Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dunham Porategovernment and Thornburg Limited

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

The idea behind Dunham Porategovernment Bond and Thornburg Limited Term 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.