Correlation Between Pax Large and Dunham High
Can any of the company-specific risk be diversified away by investing in both Pax Large and Dunham High 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 Pax Large and Dunham High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pax Large Cap and Dunham High Yield, you can compare the effects of market volatilities on Pax Large and Dunham High 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 Pax Large with a short position of Dunham High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax Large and Dunham High.
Diversification Opportunities for Pax Large and Dunham High
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pax and Dunham is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Pax Large Cap and Dunham High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham High Yield and Pax Large 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 Pax Large Cap are associated (or correlated) with Dunham High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham High Yield has no effect on the direction of Pax Large i.e., Pax Large and Dunham High go up and down completely randomly.
Pair Corralation between Pax Large and Dunham High
Assuming the 90 days horizon Pax Large Cap is expected to generate 3.1 times more return on investment than Dunham High. However, Pax Large is 3.1 times more volatile than Dunham High Yield. It trades about 0.08 of its potential returns per unit of risk. Dunham High Yield is currently generating about 0.13 per unit of risk. If you would invest 1,157 in Pax Large Cap on September 3, 2024 and sell it today you would earn a total of 397.00 from holding Pax Large Cap or generate 34.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pax Large Cap vs. Dunham High Yield
Performance |
| Timeline |
| Pax Large Cap |
| Dunham High Yield |
Pax Large and Dunham High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pax Large and Dunham High
The main advantage of trading using opposite Pax Large and Dunham High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pax Large position performs unexpectedly, Dunham High 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 High will offset losses from the drop in Dunham High's long position.| Pax Large vs. Heartland Value Plus | Pax Large vs. Columbia Small Cap | Pax Large vs. Lord Abbett Small | Pax Large vs. Mutual Of America |
| Dunham High vs. Vanguard High Yield Corporate | Dunham High vs. Vanguard High Yield Porate | Dunham High vs. Blackrock Hi Yld | Dunham High vs. Blackrock High Yield |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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