Correlation Between Small Cap and Dunham High
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Dunham High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Dunham High Yield, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Dunham High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Dunham High.
Diversification Opportunities for Small Cap and Dunham High
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Small and Dunham is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock 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 Small Cap 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 Small Cap Stock 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 Small Cap i.e., Small Cap and Dunham High go up and down completely randomly.
Pair Corralation between Small Cap and Dunham High
Assuming the 90 days horizon Small Cap Stock is expected to generate 6.83 times more return on investment than Dunham High. However, Small Cap is 6.83 times more volatile than Dunham High Yield. It trades about 0.03 of its potential returns per unit of risk. Dunham High Yield is currently generating about 0.17 per unit of risk. If you would invest 1,275 in Small Cap Stock on November 3, 2024 and sell it today you would earn a total of 94.00 from holding Small Cap Stock or generate 7.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Dunham High Yield
Performance |
| Timeline |
| Small Cap Stock |
| Dunham High Yield |
Small Cap and Dunham High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Dunham High
The main advantage of trading using opposite Small Cap and Dunham High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Lgm Risk Managed | Small Cap vs. Artisan High Income | Small Cap vs. Catalyst Exceed Defined | Small Cap vs. Ironclad Managed Risk |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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