Correlation Between Smead Funds and Dreyfus Technology

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

By analyzing existing cross correlation between Smead Funds Trust and Dreyfus Technology Growth, you can compare the effects of market volatilities on Smead Funds and Dreyfus Technology 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 Smead Funds with a short position of Dreyfus Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smead Funds and Dreyfus Technology.

Diversification Opportunities for Smead Funds and Dreyfus Technology

-0.41

Correlation Coefficient

Smead Funds  Dreyfus Technology

Very good diversification

The 3 months correlation between Smead and Dreyfus is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Smead Funds Trust and Dreyfus Technology Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Technology Growth and Smead Funds 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 Smead Funds Trust are associated (or correlated) with Dreyfus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Technology Growth has no effect on the direction of Smead Funds i.e., Smead Funds and Dreyfus Technology go up and down completely randomly.

Pair Corralation between Smead Funds and Dreyfus Technology

Assuming the 90 days horizon Smead Funds is expected to generate 3.13 times less return on investment than Dreyfus Technology. But when comparing it to its historical volatility, Smead Funds Trust is 1.24 times less risky than Dreyfus Technology. It trades about 0.04 of its potential returns per unit of risk. Dreyfus Technology Growth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,860  in Dreyfus Technology Growth on September 14, 2024 and sell it today you would earn a total of  4,142  from holding Dreyfus Technology Growth or generate 107.31% return on investment over 90 days.

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

Smead Funds Trust  vs.  Dreyfus Technology Growth

Smead Funds Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dreyfus Technology Growth

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Technology Growth are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Smead Funds and Dreyfus Technology

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

The idea behind Smead Funds Trust and Dreyfus Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.