Correlation Between Intermediate Government and Dunham Small

Can any of the company-specific risk be diversified away by investing in both Intermediate Government 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 Intermediate Government and Dunham Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Intermediate Government Bond and Dunham Small Cap, you can compare the effects of market volatilities on Intermediate Government 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 Intermediate Government with a short position of Dunham Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Government and Dunham Small.

Diversification Opportunities for Intermediate Government and Dunham Small

0.75

Correlation Coefficient

Intermediate Government  Dunham Small

Poor diversification

The 3 months correlation between Intermediate and Dunham is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond 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 Intermediate Government 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 Intermediate Government Bond 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 Intermediate Government i.e., Intermediate Government and Dunham Small go up and down completely randomly.

Pair Corralation between Intermediate Government and Dunham Small

Assuming the 90 days horizon Intermediate Government is expected to generate 4.22 times less return on investment than Dunham Small. But when comparing it to its historical volatility, Intermediate Government Bond is 8.26 times less risky than Dunham Small. It trades about 0.18 of its potential returns per unit of risk. Dunham Small Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,442  in Dunham Small Cap on July 12, 2025 and sell it today you would earn a total of  86.00  from holding Dunham Small Cap or generate 5.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Intermediate Government Bond  vs.  Dunham Small Cap

Intermediate Government

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Government Bond are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Intermediate Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dunham Small Cap

Risk-Adjusted Performance

Fair

Over the last 90 days Dunham Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dunham Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Intermediate Government and Dunham Small

The main advantage of trading using opposite Intermediate Government and Dunham Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Government 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.

The idea behind Intermediate Government Bond and Dunham Small Cap 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.