Correlation Between Dunham High and Pace Small/medium

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Can any of the company-specific risk be diversified away by investing in both Dunham High and Pace Small/medium 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 High and Pace Small/medium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dunham High Yield and Pace Smallmedium Value, you can compare the effects of market volatilities on Dunham High and Pace Small/medium 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 High with a short position of Pace Small/medium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham High and Pace Small/medium.

Diversification Opportunities for Dunham High and Pace Small/medium

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Dunham and Pace is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dunham High Yield and Pace Smallmedium Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Smallmedium Value and Dunham High 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 High Yield are associated (or correlated) with Pace Small/medium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Smallmedium Value has no effect on the direction of Dunham High i.e., Dunham High and Pace Small/medium go up and down completely randomly.

Pair Corralation between Dunham High and Pace Small/medium

Assuming the 90 days horizon Dunham High is expected to generate 1.7 times less return on investment than Pace Small/medium. But when comparing it to its historical volatility, Dunham High Yield is 4.44 times less risky than Pace Small/medium. It trades about 0.18 of its potential returns per unit of risk. Pace Smallmedium Value is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,718  in Pace Smallmedium Value on August 31, 2024 and sell it today you would earn a total of  492.00  from holding Pace Smallmedium Value or generate 28.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.73%
ValuesDaily Returns

Dunham High Yield  vs.  Pace Smallmedium Value

 Performance 
       Timeline  
Dunham High Yield 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Dunham High Yield are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dunham High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Pace Smallmedium Value 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Pace Smallmedium Value are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pace Small/medium may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Dunham High and Pace Small/medium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dunham High and Pace Small/medium

The main advantage of trading using opposite Dunham High and Pace Small/medium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dunham High position performs unexpectedly, Pace Small/medium 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 Pace Small/medium will offset losses from the drop in Pace Small/medium's long position.
The idea behind Dunham High Yield and Pace Smallmedium Value 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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