Correlation Between Dunham Small and Dunham Dynamic

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

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

Diversification Opportunities for Dunham Small and Dunham Dynamic

0.69

Correlation Coefficient

Dunham Small  Dunham Dynamic

Poor diversification

The 3 months correlation between Dunham and Dunham is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Small Cap and Dunham Dynamic Macro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Dynamic Macro and Dunham Small 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 Small Cap are associated (or correlated) with Dunham Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Dynamic Macro has no effect on the direction of Dunham Small i.e., Dunham Small and Dunham Dynamic go up and down completely randomly.

Pair Corralation between Dunham Small and Dunham Dynamic

Assuming the 90 days horizon Dunham Small Cap is expected to generate 2.97 times more return on investment than Dunham Dynamic. However, Dunham Small is 2.97 times more volatile than Dunham Dynamic Macro. It trades about 0.18 of its potential returns per unit of risk. Dunham Dynamic Macro is currently generating about 0.05 per unit of risk. If you would invest  1,859  in Dunham Small Cap on August 31, 2024 and sell it today you would earn a total of  252.00  from holding Dunham Small Cap or generate 13.56% return on investment over 90 days.

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

Dunham Small Cap  vs.  Dunham Dynamic Macro

Dunham Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Small Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dunham Small showed solid returns over the last few months and may actually be approaching a breakup point.

Dunham Dynamic Macro

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Dynamic Macro are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dunham Dynamic 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 Small and Dunham Dynamic

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

The idea behind Dunham Small Cap and Dunham Dynamic Macro 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.