Correlation Between Gabelli Small and Dunham Small

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

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

Diversification Opportunities for Gabelli Small and Dunham Small

0.53

Correlation Coefficient

Gabelli Small  Dunham Small

Very weak diversification

The 3 months correlation between Gabelli and Dunham is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Small and Dunham Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Small Cap and Gabelli 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 The Gabelli Small are associated (or correlated) with Dunham Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Small Cap has no effect on the direction of Gabelli Small i.e., Gabelli Small and Dunham Small go up and down completely randomly.

Pair Corralation between Gabelli Small and Dunham Small

Assuming the 90 days horizon The Gabelli Small is expected to under-perform the Dunham Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Gabelli Small is 1.71 times less risky than Dunham Small. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Dunham Small Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,102  in Dunham Small Cap on September 12, 2024 and sell it today you would earn a total of  20.00  from holding Dunham Small Cap or generate 0.95% return on investment over 90 days.

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

The Gabelli Small  vs.  Dunham Small Cap

Gabelli Small

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Small are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gabelli Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dunham Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Small Cap are ranked lower than 15 (%) 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.

Pair Trading with Gabelli Small and Dunham Small

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

The idea behind The Gabelli Small and Dunham Small Cap 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.