Correlation Between Dreyfus Balanced and Dreyfus Midcap

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

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

Diversification Opportunities for Dreyfus Balanced and Dreyfus Midcap

0.94

Correlation Coefficient

Dreyfus Balanced  Dreyfus Midcap

Almost no diversification

The 3 months correlation between Dreyfus and Dreyfus is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Balanced Opportunity and Dreyfus Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Midcap Index and Dreyfus Balanced 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 Balanced Opportunity are associated (or correlated) with Dreyfus Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Midcap Index has no effect on the direction of Dreyfus Balanced i.e., Dreyfus Balanced and Dreyfus Midcap go up and down completely randomly.

Pair Corralation between Dreyfus Balanced and Dreyfus Midcap

Assuming the 90 days horizon Dreyfus Balanced Opportunity is expected to generate 0.45 times more return on investment than Dreyfus Midcap. However, Dreyfus Balanced Opportunity is 2.25 times less risky than Dreyfus Midcap. It trades about 0.09 of its potential returns per unit of risk. Dreyfus Midcap Index is currently generating about 0.02 per unit of risk. If you would invest  2,025  in Dreyfus Balanced Opportunity on September 4, 2024 and sell it today you would earn a total of  545.00  from holding Dreyfus Balanced Opportunity or generate 26.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Dreyfus Balanced Opportunity  vs.  Dreyfus Midcap Index

Dreyfus Balanced Opp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Balanced Opportunity are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Dreyfus Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Midcap Index

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Midcap Index are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus Midcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dreyfus Balanced and Dreyfus Midcap

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

The idea behind Dreyfus Balanced Opportunity and Dreyfus Midcap Index 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.