Correlation Between Dunham Real and Metropolitan West

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

By analyzing existing cross correlation between Dunham Real Estate and Metropolitan West Alpha, you can compare the effects of market volatilities on Dunham Real and Metropolitan West 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 Real with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Real and Metropolitan West.

Diversification Opportunities for Dunham Real and Metropolitan West

0.35

Correlation Coefficient

Dunham Real  Metropolitan West

Weak diversification

The 3 months correlation between Dunham and Metropolitan is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Real Estate and Metropolitan West Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Alpha and Dunham Real 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 Real Estate are associated (or correlated) with Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West Alpha has no effect on the direction of Dunham Real i.e., Dunham Real and Metropolitan West go up and down completely randomly.

Pair Corralation between Dunham Real and Metropolitan West

Assuming the 90 days horizon Dunham Real Estate is expected to generate about the same return on investment as Metropolitan West Alpha. However, Dunham Real is 1.65 times more volatile than Metropolitan West Alpha. It trades about 0.11 of its potential returns per unit of risk. Metropolitan West Alpha is currently producing about 0.18 per unit of risk. If you would invest  1,113  in Metropolitan West Alpha on September 3, 2024 and sell it today you would earn a total of  66.00  from holding Metropolitan West Alpha or generate 5.93% return on investment over 90 days.

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

Dunham Real Estate  vs.  Metropolitan West Alpha

Dunham Real Estate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Real Estate are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dunham Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Metropolitan West Alpha

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan West Alpha are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Metropolitan West 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 Real and Metropolitan West

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

The idea behind Dunham Real Estate and Metropolitan West Alpha 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.