Correlation Between Pace Small/medium and Dreyfus Research

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

By analyzing existing cross correlation between Pace Smallmedium Growth and Dreyfus Research Growth, you can compare the effects of market volatilities on Pace Small/medium and Dreyfus Research 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 Pace Small/medium with a short position of Dreyfus Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Small/medium and Dreyfus Research.

Diversification Opportunities for Pace Small/medium and Dreyfus Research

0.93

Correlation Coefficient

Pace Small/medium  Dreyfus Research

Almost no diversification

The 3 months correlation between Pace and Dreyfus is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Pace Smallmedium Growth and Dreyfus Research Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Research Growth and Pace Small/medium 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 Pace Smallmedium Growth are associated (or correlated) with Dreyfus Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Research Growth has no effect on the direction of Pace Small/medium i.e., Pace Small/medium and Dreyfus Research go up and down completely randomly.

Pair Corralation between Pace Small/medium and Dreyfus Research

Assuming the 90 days horizon Pace Small/medium is expected to generate 1.01 times less return on investment than Dreyfus Research. In addition to that, Pace Small/medium is 1.13 times more volatile than Dreyfus Research Growth. It trades about 0.22 of its total potential returns per unit of risk. Dreyfus Research Growth is currently generating about 0.25 per unit of volatility. If you would invest  1,833  in Dreyfus Research Growth on September 4, 2024 and sell it today you would earn a total of  314.00  from holding Dreyfus Research Growth or generate 17.13% return on investment over 90 days.

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

Pace Smallmedium Growth  vs.  Dreyfus Research Growth

Pace Smallmedium Growth

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pace Smallmedium Growth are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pace Small/medium showed solid returns over the last few months and may actually be approaching a breakup point.

Dreyfus Research Growth

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Research Growth are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus Research showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pace Small/medium and Dreyfus Research

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

The idea behind Pace Smallmedium Growth and Dreyfus Research Growth 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.