Correlation Between Dreyfus Bond and Dreyfus Smallcap

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

By analyzing existing cross correlation between Dreyfus Bond Market and Dreyfus Smallcap Stock, you can compare the effects of market volatilities on Dreyfus Bond and Dreyfus Smallcap 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 Dreyfus Bond with a short position of Dreyfus Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Bond and Dreyfus Smallcap.

Diversification Opportunities for Dreyfus Bond and Dreyfus Smallcap

-0.6

Correlation Coefficient

Dreyfus Bond  Dreyfus Smallcap

Excellent diversification

The 3 months correlation between Dreyfus and Dreyfus is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Bond Market and Dreyfus Smallcap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Smallcap Stock and Dreyfus Bond 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 Dreyfus Bond Market are associated (or correlated) with Dreyfus Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Smallcap Stock has no effect on the direction of Dreyfus Bond i.e., Dreyfus Bond and Dreyfus Smallcap go up and down completely randomly.

Pair Corralation between Dreyfus Bond and Dreyfus Smallcap

Assuming the 90 days horizon Dreyfus Bond Market is expected to under-perform the Dreyfus Smallcap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dreyfus Bond Market is 4.25 times less risky than Dreyfus Smallcap. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Dreyfus Smallcap Stock is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,721  in Dreyfus Smallcap Stock on September 3, 2024 and sell it today you would earn a total of  328.00  from holding Dreyfus Smallcap Stock or generate 12.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dreyfus Bond Market  vs.  Dreyfus Smallcap Stock

Dreyfus Bond Market

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dreyfus Smallcap Stock

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Smallcap Stock are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus Smallcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dreyfus Bond and Dreyfus Smallcap

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

The idea behind Dreyfus Bond Market and Dreyfus Smallcap Stock 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.