Correlation Between Dunham Large and Thornburg Developing

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

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

Diversification Opportunities for Dunham Large and Thornburg Developing

-0.05

Correlation Coefficient

Dunham Large  Thornburg Developing

Good diversification

The 3 months correlation between Dunham and Thornburg is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Large Cap and Thornburg Developing World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Developing and Dunham Large 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 Large Cap are associated (or correlated) with Thornburg Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Developing has no effect on the direction of Dunham Large i.e., Dunham Large and Thornburg Developing go up and down completely randomly.

Pair Corralation between Dunham Large and Thornburg Developing

Assuming the 90 days horizon Dunham Large is expected to generate 1.23 times less return on investment than Thornburg Developing. But when comparing it to its historical volatility, Dunham Large Cap is 1.32 times less risky than Thornburg Developing. It trades about 0.1 of its potential returns per unit of risk. Thornburg Developing World is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,160  in Thornburg Developing World on September 14, 2024 and sell it today you would earn a total of  93.00  from holding Thornburg Developing World or generate 4.31% return on investment over 90 days.

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

Dunham Large Cap  vs.  Thornburg Developing World

Dunham Large Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Large Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dunham Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Thornburg Developing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Developing World are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Thornburg Developing 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 Large and Thornburg Developing

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

The idea behind Dunham Large Cap and Thornburg Developing World 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..