Correlation Between Western Asset and Dunham Small
Can any of the company-specific risk be diversified away by investing in both Western Asset and Dunham Small 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 Western Asset and Dunham Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset High and Dunham Small Cap, you can compare the effects of market volatilities on Western Asset and Dunham Small 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 Western Asset with a short position of Dunham Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Dunham Small.
Diversification Opportunities for Western Asset and Dunham Small
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Dunham is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Dunham Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Small Cap and Western Asset 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 Western Asset High are associated (or correlated) with Dunham Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Small Cap has no effect on the direction of Western Asset i.e., Western Asset and Dunham Small go up and down completely randomly.
Pair Corralation between Western Asset and Dunham Small
Assuming the 90 days horizon Western Asset is expected to generate 1.45 times less return on investment than Dunham Small. But when comparing it to its historical volatility, Western Asset High is 4.95 times less risky than Dunham Small. It trades about 0.17 of its potential returns per unit of risk. Dunham Small Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,252 in Dunham Small Cap on September 12, 2024 and sell it today you would earn a total of 163.00 from holding Dunham Small Cap or generate 13.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset High vs. Dunham Small Cap
Performance |
| Timeline |
| Western Asset High |
| Dunham Small Cap |
Western Asset and Dunham Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Dunham Small
The main advantage of trading using opposite Western Asset and Dunham Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Dunham Small 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 Small will offset losses from the drop in Dunham Small's long position.| Western Asset vs. SCOR PK | Western Asset vs. Morningstar Unconstrained Allocation | Western Asset vs. Via Renewables | Western Asset vs. Bondbloxx ETF Trust |
| Dunham Small vs. Ab Global Risk | Dunham Small vs. T Rowe Price | Dunham Small vs. Western Asset High | Dunham Small vs. Ab High Income |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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