Correlation Between Keeley Small and Dunham Large

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

Diversification Opportunities for Keeley Small and Dunham Large

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Keeley and Dunham is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Keeley Small Cap and Dunham Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Large Cap and Keeley Small 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 Keeley Small Cap are associated (or correlated) with Dunham Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Large Cap has no effect on the direction of Keeley Small i.e., Keeley Small and Dunham Large go up and down completely randomly.

Pair Corralation between Keeley Small and Dunham Large

Assuming the 90 days horizon Keeley Small is expected to generate 1.02 times less return on investment than Dunham Large. In addition to that, Keeley Small is 1.67 times more volatile than Dunham Large Cap. It trades about 0.03 of its total potential returns per unit of risk. Dunham Large Cap is currently generating about 0.06 per unit of volatility. If you would invest  1,634  in Dunham Large Cap on September 3, 2024 and sell it today you would earn a total of  349.00  from holding Dunham Large Cap or generate 21.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Keeley Small Cap  vs.  Dunham Large Cap

 Performance 
       Timeline  
Keeley Small Cap 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Keeley Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Keeley Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Dunham Large Cap 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Large Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dunham Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Keeley Small and Dunham Large Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Keeley Small and Dunham Large

The main advantage of trading using opposite Keeley Small and Dunham Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keeley Small position performs unexpectedly, Dunham 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 Dunham Large will offset losses from the drop in Dunham Large's long position.
The idea behind Keeley Small Cap and Dunham 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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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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