Correlation Between Vanguard Total and Dreyfus Treasury

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

By analyzing existing cross correlation between Vanguard Total Stock and Dreyfus Treasury Securities, you can compare the effects of market volatilities on Vanguard Total and Dreyfus Treasury 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 Vanguard Total with a short position of Dreyfus Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Dreyfus Treasury.

Diversification Opportunities for Vanguard Total and Dreyfus Treasury

0.33

Correlation Coefficient

Vanguard Total  Dreyfus Treasury

Weak diversification

The 3 months correlation between Vanguard and Dreyfus is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Dreyfus Treasury Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Treasury Sec and Vanguard Total 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 Vanguard Total Stock are associated (or correlated) with Dreyfus Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Treasury Sec has no effect on the direction of Vanguard Total i.e., Vanguard Total and Dreyfus Treasury go up and down completely randomly.

Pair Corralation between Vanguard Total and Dreyfus Treasury

Assuming the 90 days horizon Vanguard Total Stock is expected to generate 0.88 times more return on investment than Dreyfus Treasury. However, Vanguard Total Stock is 1.14 times less risky than Dreyfus Treasury. It trades about 0.11 of its potential returns per unit of risk. Dreyfus Treasury Securities is currently generating about 0.02 per unit of risk. If you would invest  9,224  in Vanguard Total Stock on September 28, 2024 and sell it today you would earn a total of  5,081  from holding Vanguard Total Stock or generate 55.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.8%
Values	Daily Returns

Vanguard Total Stock  vs.  Dreyfus Treasury Securities

Vanguard Total Stock

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Treasury Sec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Total and Dreyfus Treasury

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

The idea behind Vanguard Total Stock and Dreyfus Treasury Securities 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.