Correlation Between DOW and Dunham Real

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both DOW 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 DOW and Dunham Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DOW and Dunham Real Estate, you can compare the effects of market volatilities on DOW 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 DOW with a short position of Dunham Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOW and Dunham Real.

Diversification Opportunities for DOW and Dunham Real

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between DOW and Dunham is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding DOW 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 DOW 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 DOW 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 DOW i.e., DOW and Dunham Real go up and down completely randomly.
    Optimize

Pair Corralation between DOW and Dunham Real

Given the investment horizon of 90 days DOW is expected to generate 0.78 times more return on investment than Dunham Real. However, DOW is 1.28 times less risky than Dunham Real. It trades about -0.24 of its potential returns per unit of risk. Dunham Real Estate is currently generating about -0.4 per unit of risk. If you would invest  3,179,087  in DOW on July 1, 2022 and sell it today you would lose (210,713)  from holding DOW or give up 6.63% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy95.45%
ValuesDaily Returns

DOW  vs.  Dunham Real Estate

 Performance (%) 
       Timeline  

DOW and Dunham Real Volatility Contrast

   Predicted Return Density   
       Returns  

DOW

Pair trading matchups for DOW

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.

Dunham Real Estate

Pair trading matchups for Dunham Real

Pair Trading with DOW and Dunham Real

The main advantage of trading using opposite DOW and Dunham Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOW 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.
The idea behind DOW and Dunham Real Estate 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.
Dunham Real vs. International Business Machines
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

Other Complementary Tools

Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Go
Piotroski F Score
Get Piotroski F Score based on binary analysis strategy of nine different fundamentals
Go
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Go
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Content Syndication
Quickly integrate customizable finance content to your own investment portal
Go
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Go
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Go
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Go
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Go
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Go
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency
Go