Correlation Between Dreyfus Large and Dreyfus Balanced

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

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

Diversification Opportunities for Dreyfus Large and Dreyfus Balanced

0.98

Correlation Coefficient

Dreyfus Large  Dreyfus Balanced

Almost no diversification

The 3 months correlation between Dreyfus and Dreyfus is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Large Cap and Dreyfus Balanced Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Balanced Opp and Dreyfus Large 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 Large Cap are associated (or correlated) with Dreyfus Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Balanced Opp has no effect on the direction of Dreyfus Large i.e., Dreyfus Large and Dreyfus Balanced go up and down completely randomly.

Pair Corralation between Dreyfus Large and Dreyfus Balanced

Assuming the 90 days horizon Dreyfus Large Cap is expected to generate 1.58 times more return on investment than Dreyfus Balanced. However, Dreyfus Large is 1.58 times more volatile than Dreyfus Balanced Opportunity. It trades about 0.22 of its potential returns per unit of risk. Dreyfus Balanced Opportunity is currently generating about 0.21 per unit of risk. If you would invest  1,570  in Dreyfus Large Cap on September 3, 2024 and sell it today you would earn a total of  165.00  from holding Dreyfus Large Cap or generate 10.51% return on investment over 90 days.

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

Dreyfus Large Cap  vs.  Dreyfus Balanced Opportunity

Dreyfus Large Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Large Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dreyfus Balanced Opp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Balanced Opportunity are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Dreyfus Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dreyfus Large and Dreyfus Balanced

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

The idea behind Dreyfus Large Cap and Dreyfus Balanced Opportunity 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.