Correlation Between Small Cap and Dunham Emerging

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

By analyzing existing cross correlation between Small Cap Value Series and Dunham Emerging Markets, you can compare the effects of market volatilities on Small Cap and Dunham Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Dunham Emerging.

Diversification Opportunities for Small Cap and Dunham Emerging

0.63

Correlation Coefficient

Small Cap  Dunham Emerging

Poor diversification

The 3 months correlation between Small and Dunham is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Series and Dunham Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Emerging Markets 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 Value Series are associated (or correlated) with Dunham Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Emerging Markets has no effect on the direction of Small Cap i.e., Small Cap and Dunham Emerging go up and down completely randomly.

Pair Corralation between Small Cap and Dunham Emerging

Assuming the 90 days horizon Small Cap Value Series is expected to generate 1.45 times more return on investment than Dunham Emerging. However, Small Cap is 1.45 times more volatile than Dunham Emerging Markets. It trades about 0.12 of its potential returns per unit of risk. Dunham Emerging Markets is currently generating about 0.16 per unit of risk. If you would invest  1,410  in Small Cap Value Series on May 17, 2025 and sell it today you would earn a total of  118.00  from holding Small Cap Value Series or generate 8.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Small Cap Value Series  vs.  Dunham Emerging Markets

Small Cap Value

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Value Series are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Dunham Emerging Markets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Emerging Markets are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Dunham Emerging may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Small Cap and Dunham Emerging

The main advantage of trading using opposite Small Cap and Dunham Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Dunham Emerging 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 Emerging will offset losses from the drop in Dunham Emerging's long position.

The idea behind Small Cap Value Series and Dunham Emerging Markets 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..