Correlation Between American Beacon and Dreyfus Opportunistic

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

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

Diversification Opportunities for American Beacon and Dreyfus Opportunistic

0.98

Correlation Coefficient

American Beacon  Dreyfus Opportunistic

Almost no diversification

The 3 months correlation between American and DREYFUS is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Small and Dreyfus Opportunistic Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Opportunistic and American Beacon 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 American Beacon Small are associated (or correlated) with Dreyfus Opportunistic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Opportunistic has no effect on the direction of American Beacon i.e., American Beacon and Dreyfus Opportunistic go up and down completely randomly.

Pair Corralation between American Beacon and Dreyfus Opportunistic

Assuming the 90 days horizon American Beacon Small is expected to generate 1.44 times more return on investment than Dreyfus Opportunistic. However, American Beacon is 1.44 times more volatile than Dreyfus Opportunistic Midcap. It trades about 0.06 of its potential returns per unit of risk. Dreyfus Opportunistic Midcap is currently generating about 0.06 per unit of risk. If you would invest  2,139  in American Beacon Small on September 5, 2024 and sell it today you would earn a total of  771.00  from holding American Beacon Small or generate 36.04% return on investment over 90 days.

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

American Beacon Small  vs.  Dreyfus Opportunistic Midcap

American Beacon Small

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Small are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, American Beacon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dreyfus Opportunistic

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Opportunistic Midcap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus Opportunistic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Beacon and Dreyfus Opportunistic

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

The idea behind American Beacon Small and Dreyfus Opportunistic Midcap 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.