Correlation Between Dreyfus Natural and Dreyfus/the Boston

Can any of the company-specific risk be diversified away by investing in both Dreyfus Natural and Dreyfus/the Boston 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 Dreyfus/the Boston 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 Dreyfusthe Boston Pany, you can compare the effects of market volatilities on Dreyfus Natural and Dreyfus/the Boston 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 Dreyfus/the Boston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Natural and Dreyfus/the Boston.

Diversification Opportunities for Dreyfus Natural and Dreyfus/the Boston

0.77

Correlation Coefficient

Dreyfus Natural  Dreyfus/the Boston

Poor diversification

The 3 months correlation between Dreyfus and Dreyfus/the is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Natural Resources and Dreyfusthe Boston Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfusthe Boston Pany 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 Dreyfus/the Boston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfusthe Boston Pany has no effect on the direction of Dreyfus Natural i.e., Dreyfus Natural and Dreyfus/the Boston go up and down completely randomly.

Pair Corralation between Dreyfus Natural and Dreyfus/the Boston

Assuming the 90 days horizon Dreyfus Natural is expected to generate 2.1 times less return on investment than Dreyfus/the Boston. But when comparing it to its historical volatility, Dreyfus Natural Resources is 1.01 times less risky than Dreyfus/the Boston. It trades about 0.13 of its potential returns per unit of risk. Dreyfusthe Boston Pany is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,512  in Dreyfusthe Boston Pany on September 5, 2024 and sell it today you would earn a total of  522.00  from holding Dreyfusthe Boston Pany or generate 20.78% return on investment over 90 days.

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

Dreyfus Natural Resources  vs.  Dreyfusthe Boston Pany

Dreyfus Natural Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Natural Resources are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dreyfusthe Boston Pany

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfusthe Boston Pany are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus/the Boston showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dreyfus Natural and Dreyfus/the Boston

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

The idea behind Dreyfus Natural Resources and Dreyfusthe Boston Pany 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.