Correlation Between Dreyfus Natural and Jpmorgan Small

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

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

Diversification Opportunities for Dreyfus Natural and Jpmorgan Small

0.68

Correlation Coefficient

Dreyfus Natural  Jpmorgan Small

Poor diversification

The 3 months correlation between Dreyfus and Jpmorgan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Natural Resources and Jpmorgan Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Small Cap and Dreyfus Natural 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 Natural Resources are associated (or correlated) with Jpmorgan Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Small Cap has no effect on the direction of Dreyfus Natural i.e., Dreyfus Natural and Jpmorgan Small go up and down completely randomly.

Pair Corralation between Dreyfus Natural and Jpmorgan Small

Assuming the 90 days horizon Dreyfus Natural Resources is expected to under-perform the Jpmorgan Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dreyfus Natural Resources is 1.17 times less risky than Jpmorgan Small. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Jpmorgan Small Cap is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,873  in Jpmorgan Small Cap on September 27, 2024 and sell it today you would lose (165.00) from holding Jpmorgan Small Cap or give up 8.81% of portfolio value over 90 days.

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

Dreyfus Natural Resources  vs.  Jpmorgan Small Cap

Dreyfus Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfus Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Jpmorgan Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jpmorgan Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Dreyfus Natural and Jpmorgan Small

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

The idea behind Dreyfus Natural Resources and Jpmorgan 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.