Correlation Between Dreyfus Equity and Dreyfus Institutional

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

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

Diversification Opportunities for Dreyfus Equity and Dreyfus Institutional

0.99

Correlation Coefficient

Dreyfus Equity  Dreyfus Institutional

No risk reduction

The 3 months correlation between Dreyfus and Dreyfus is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Equity Income and Dreyfus Institutional Sp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Institutional and Dreyfus Equity 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 Equity Income are associated (or correlated) with Dreyfus Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Institutional has no effect on the direction of Dreyfus Equity i.e., Dreyfus Equity and Dreyfus Institutional go up and down completely randomly.

Pair Corralation between Dreyfus Equity and Dreyfus Institutional

Assuming the 90 days horizon Dreyfus Equity is expected to generate 1.14 times less return on investment than Dreyfus Institutional. But when comparing it to its historical volatility, Dreyfus Equity Income is 1.16 times less risky than Dreyfus Institutional. It trades about 0.2 of its potential returns per unit of risk. Dreyfus Institutional Sp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,041  in Dreyfus Institutional Sp on September 1, 2024 and sell it today you would earn a total of  568.00  from holding Dreyfus Institutional Sp or generate 9.4% return on investment over 90 days.

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

Dreyfus Equity Income  vs.  Dreyfus Institutional Sp

Dreyfus Equity Income

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Equity Income are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Dreyfus Equity may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Dreyfus Institutional

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Institutional Sp are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Dreyfus Institutional may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Dreyfus Equity and Dreyfus Institutional

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

The idea behind Dreyfus Equity Income and Dreyfus Institutional Sp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.