Correlation Between Dunham High and Value Line
Can any of the company-specific risk be diversified away by investing in both Dunham High and Value Line 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 Value Line 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 Value Line Small, you can compare the effects of market volatilities on Dunham High and Value Line 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 Value Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham High and Value Line.
Diversification Opportunities for Dunham High and Value Line
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dunham and Value is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dunham High Yield and Value Line Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Line Small 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 Value Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Line Small has no effect on the direction of Dunham High i.e., Dunham High and Value Line go up and down completely randomly.
Pair Corralation between Dunham High and Value Line
Assuming the 90 days horizon Dunham High Yield is expected to generate 0.14 times more return on investment than Value Line. However, Dunham High Yield is 7.12 times less risky than Value Line. It trades about 0.17 of its potential returns per unit of risk. Value Line Small is currently generating about -0.09 per unit of risk. If you would invest 886.00 in Dunham High Yield on September 12, 2024 and sell it today you would earn a total of 4.00 from holding Dunham High Yield or generate 0.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dunham High Yield vs. Value Line Small
Performance |
| Timeline |
| Dunham High Yield |
| Value Line Small |
Dunham High and Value Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dunham High and Value Line
The main advantage of trading using opposite Dunham High and Value Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dunham High position performs unexpectedly, Value Line 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 Value Line will offset losses from the drop in Value Line's long position.| Dunham High vs. Calvert Global Energy | Dunham High vs. Gmo Resources | Dunham High vs. Tortoise Energy Independence | Dunham High vs. Gamco Natural Resources |
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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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