Correlation Between Dunham Corporate/govern and Madison Investors
Can any of the company-specific risk be diversified away by investing in both Dunham Corporate/govern and Madison Investors 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 Corporate/govern and Madison Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dunham Porategovernment Bond and Madison Investors Fund, you can compare the effects of market volatilities on Dunham Corporate/govern and Madison Investors 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 Corporate/govern with a short position of Madison Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Corporate/govern and Madison Investors.
Diversification Opportunities for Dunham Corporate/govern and Madison Investors
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dunham and Madison is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Porategovernment Bond and Madison Investors Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Investors and Dunham Corporate/govern 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 Porategovernment Bond are associated (or correlated) with Madison Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Investors has no effect on the direction of Dunham Corporate/govern i.e., Dunham Corporate/govern and Madison Investors go up and down completely randomly.
Pair Corralation between Dunham Corporate/govern and Madison Investors
Assuming the 90 days horizon Dunham Corporate/govern is expected to generate 3.04 times less return on investment than Madison Investors. But when comparing it to its historical volatility, Dunham Porategovernment Bond is 2.89 times less risky than Madison Investors. It trades about 0.08 of its potential returns per unit of risk. Madison Investors Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,743 in Madison Investors Fund on September 2, 2024 and sell it today you would earn a total of 497.00 from holding Madison Investors Fund or generate 18.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dunham Porategovernment Bond vs. Madison Investors Fund
Performance |
| Timeline |
| Dunham Porategovernment |
| Madison Investors |
Dunham Corporate/govern and Madison Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dunham Corporate/govern and Madison Investors
The main advantage of trading using opposite Dunham Corporate/govern and Madison Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dunham Corporate/govern position performs unexpectedly, Madison Investors 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 Madison Investors will offset losses from the drop in Madison Investors' long position.The idea behind Dunham Porategovernment Bond and Madison Investors Fund 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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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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