Correlation Between Sit Government and Dunham Porategovernment

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

By analyzing existing cross correlation between Sit Government Securities and Dunham Porategovernment Bond, you can compare the effects of market volatilities on Sit Government and Dunham Porategovernment 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 Sit Government with a short position of Dunham Porategovernment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sit Government and Dunham Porategovernment.

Diversification Opportunities for Sit Government and Dunham Porategovernment

1.0

Correlation Coefficient

Sit Government  Dunham Porategovernment

No risk reduction

The 3 months correlation between Sit and Dunham is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Sit Government Securities and Dunham Porategovernment Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Porategovernment and Sit Government 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 Sit Government Securities are associated (or correlated) with Dunham Porategovernment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Porategovernment has no effect on the direction of Sit Government i.e., Sit Government and Dunham Porategovernment go up and down completely randomly.

Pair Corralation between Sit Government and Dunham Porategovernment

Assuming the 90 days horizon Sit Government is expected to generate 1.29 times less return on investment than Dunham Porategovernment. But when comparing it to its historical volatility, Sit Government Securities is 1.2 times less risky than Dunham Porategovernment. It trades about 0.05 of its potential returns per unit of risk. Dunham Porategovernment Bond is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,163  in Dunham Porategovernment Bond on September 12, 2024 and sell it today you would earn a total of  102.00  from holding Dunham Porategovernment Bond or generate 8.77% return on investment over 90 days.

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

Sit Government Securities  vs.  Dunham Porategovernment Bond

Sit Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Sit Government and Dunham Porategovernment

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

The idea behind Sit Government Securities and Dunham Porategovernment Bond 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.