Correlation Between Dreyfus Gnma and Dreyfus New

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

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

Diversification Opportunities for Dreyfus Gnma and Dreyfus New

0.66

Correlation Coefficient

Dreyfus Gnma  Dreyfus New

Poor diversification

The 3 months correlation between Dreyfus and Dreyfus is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Gnma Fund and Dreyfus New Jersey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus New Jersey and Dreyfus Gnma 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 Gnma Fund are associated (or correlated) with Dreyfus New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus New Jersey has no effect on the direction of Dreyfus Gnma i.e., Dreyfus Gnma and Dreyfus New go up and down completely randomly.

Pair Corralation between Dreyfus Gnma and Dreyfus New

Assuming the 90 days horizon Dreyfus Gnma Fund is expected to under-perform the Dreyfus New. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dreyfus Gnma Fund is 1.03 times less risky than Dreyfus New. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Dreyfus New Jersey is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,191  in Dreyfus New Jersey on September 26, 2024 and sell it today you would lose (18.00) from holding Dreyfus New Jersey or give up 1.51% of portfolio value over 90 days.

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

Dreyfus Gnma Fund  vs.  Dreyfus New Jersey

Dreyfus Gnma

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dreyfus New Jersey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfus New Jersey has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Dreyfus New 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 Gnma and Dreyfus New

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

The idea behind Dreyfus Gnma Fund and Dreyfus New Jersey 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.