Correlation Between Vanguard Intermediate-ter and Dreyfus Amt-free

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

By analyzing existing cross correlation between Vanguard Intermediate Term Tax Exempt and Dreyfus Amt Free Municipal, you can compare the effects of market volatilities on Vanguard Intermediate-ter and Dreyfus Amt-free 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 Intermediate-ter with a short position of Dreyfus Amt-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate-ter and Dreyfus Amt-free.

Diversification Opportunities for Vanguard Intermediate-ter and Dreyfus Amt-free

0.89

Correlation Coefficient

Vanguard Intermediate-ter  Dreyfus Amt-free

Very poor diversification

The 3 months correlation between Vanguard and Dreyfus is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Tax and Dreyfus Amt Free Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Amt Free and Vanguard Intermediate-ter 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 Intermediate Term Tax Exempt are associated (or correlated) with Dreyfus Amt-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Amt Free has no effect on the direction of Vanguard Intermediate-ter i.e., Vanguard Intermediate-ter and Dreyfus Amt-free go up and down completely randomly.

Pair Corralation between Vanguard Intermediate-ter and Dreyfus Amt-free

Assuming the 90 days horizon Vanguard Intermediate-ter is expected to generate 1.56 times less return on investment than Dreyfus Amt-free. But when comparing it to its historical volatility, Vanguard Intermediate Term Tax Exempt is 1.22 times less risky than Dreyfus Amt-free. It trades about 0.05 of its potential returns per unit of risk. Dreyfus Amt Free Municipal is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,343  in Dreyfus Amt Free Municipal on September 4, 2024 and sell it today you would earn a total of  14.00  from holding Dreyfus Amt Free Municipal or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Vanguard Intermediate Term Tax  vs.  Dreyfus Amt Free Municipal

Vanguard Intermediate-ter

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Intermediate Term Tax Exempt are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Intermediate-ter is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Amt Free

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Amt Free Municipal are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Dreyfus Amt-free 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 Intermediate-ter and Dreyfus Amt-free

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

The idea behind Vanguard Intermediate Term Tax Exempt and Dreyfus Amt Free Municipal 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.