Correlation Between Dunham Corporate/govern and Aqr Equity
Can any of the company-specific risk be diversified away by investing in both Dunham Corporate/govern and Aqr Equity 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 Aqr Equity 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 Aqr Equity Market, you can compare the effects of market volatilities on Dunham Corporate/govern and Aqr Equity 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 Aqr Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Corporate/govern and Aqr Equity.
Diversification Opportunities for Dunham Corporate/govern and Aqr Equity
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dunham and Aqr is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Porategovernment Bond and Aqr Equity Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Equity Market 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 Aqr Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Equity Market has no effect on the direction of Dunham Corporate/govern i.e., Dunham Corporate/govern and Aqr Equity go up and down completely randomly.
Pair Corralation between Dunham Corporate/govern and Aqr Equity
Assuming the 90 days horizon Dunham Porategovernment Bond is expected to under-perform the Aqr Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dunham Porategovernment Bond is 1.44 times less risky than Aqr Equity. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Aqr Equity Market is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,008 in Aqr Equity Market on September 2, 2024 and sell it today you would earn a total of 39.00 from holding Aqr Equity Market or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dunham Porategovernment Bond vs. Aqr Equity Market
Performance |
| Timeline |
| Dunham Porategovernment |
| Aqr Equity Market |
Dunham Corporate/govern and Aqr Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dunham Corporate/govern and Aqr Equity
The main advantage of trading using opposite Dunham Corporate/govern and Aqr Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dunham Corporate/govern position performs unexpectedly, Aqr Equity 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 Aqr Equity will offset losses from the drop in Aqr Equity's long position.The idea behind Dunham Porategovernment Bond and Aqr Equity Market 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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