Correlation Between Capital World and Dunham Real
Can any of the company-specific risk be diversified away by investing in both Capital World and Dunham Real 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 Capital World and Dunham Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital World Bond and Dunham Real Estate, you can compare the effects of market volatilities on Capital World and Dunham Real 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 Capital World with a short position of Dunham Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Dunham Real.
Diversification Opportunities for Capital World and Dunham Real
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Capital and Dunham is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Bond and Dunham Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Real Estate and Capital World 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 Capital World Bond are associated (or correlated) with Dunham Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Real Estate has no effect on the direction of Capital World i.e., Capital World and Dunham Real go up and down completely randomly.
Pair Corralation between Capital World and Dunham Real
Assuming the 90 days horizon Capital World is expected to generate 5.75 times less return on investment than Dunham Real. But when comparing it to its historical volatility, Capital World Bond is 2.9 times less risky than Dunham Real. It trades about 0.03 of its potential returns per unit of risk. Dunham Real Estate is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,100 in Dunham Real Estate on August 31, 2024 and sell it today you would earn a total of 282.00 from holding Dunham Real Estate or generate 25.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Bond vs. Dunham Real Estate
Performance |
| Timeline |
| Capital World Bond |
| Dunham Real Estate |
Capital World and Dunham Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Dunham Real
The main advantage of trading using opposite Capital World and Dunham Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Dunham Real 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 Real will offset losses from the drop in Dunham Real's long position.| Capital World vs. Templeton Global Bond | Capital World vs. Capital World Bond | Capital World vs. Capital World Bond | Capital World vs. Capital World Bond |
| Dunham Real vs. Fidelity Series 1000 | Dunham Real vs. Fundamental Large Cap | Dunham Real vs. Large Cap Growth Profund | Dunham Real vs. Jhancock Disciplined Value |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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