Correlation Between Dunham Corporate/govern and Simt Large
Can any of the company-specific risk be diversified away by investing in both Dunham Corporate/govern and Simt Large 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 Simt Large 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 Simt Large Cap, you can compare the effects of market volatilities on Dunham Corporate/govern and Simt Large 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 Simt Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Corporate/govern and Simt Large.
Diversification Opportunities for Dunham Corporate/govern and Simt Large
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dunham and Simt is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Porategovernment Bond and Simt Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Large Cap 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 Simt Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Large Cap has no effect on the direction of Dunham Corporate/govern i.e., Dunham Corporate/govern and Simt Large go up and down completely randomly.
Pair Corralation between Dunham Corporate/govern and Simt Large
Assuming the 90 days horizon Dunham Corporate/govern is expected to generate 4.07 times less return on investment than Simt Large. But when comparing it to its historical volatility, Dunham Porategovernment Bond is 2.39 times less risky than Simt Large. It trades about 0.07 of its potential returns per unit of risk. Simt Large Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,501 in Simt Large Cap on September 1, 2024 and sell it today you would earn a total of 395.00 from holding Simt Large Cap or generate 15.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Dunham Porategovernment Bond vs. Simt Large Cap
Performance |
| Timeline |
| Dunham Porategovernment |
| Simt Large Cap |
Dunham Corporate/govern and Simt Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dunham Corporate/govern and Simt Large
The main advantage of trading using opposite Dunham Corporate/govern and Simt Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dunham Corporate/govern position performs unexpectedly, Simt Large 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 Simt Large will offset losses from the drop in Simt Large's long position.The idea behind Dunham Porategovernment Bond and Simt Large 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.
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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