Correlation Between Dynamic Total and Dreyfus Midcap

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

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

Diversification Opportunities for Dynamic Total and Dreyfus Midcap

0.76

Correlation Coefficient

Dynamic Total  Dreyfus Midcap

Poor diversification

The 3 months correlation between Dynamic and Dreyfus is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Total Return 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 Dynamic 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 Dynamic Total Return 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 Dynamic Total i.e., Dynamic Total and Dreyfus Midcap go up and down completely randomly.

Pair Corralation between Dynamic Total and Dreyfus Midcap

Assuming the 90 days horizon Dynamic Total Return is expected to generate 0.33 times more return on investment than Dreyfus Midcap. However, Dynamic Total Return is 3.06 times less risky than Dreyfus Midcap. It trades about -0.05 of its potential returns per unit of risk. Dreyfus Midcap Index is currently generating about -0.09 per unit of risk. If you would invest  1,432  in Dynamic Total Return on December 30, 2024 and sell it today you would lose (17.00) from holding Dynamic Total Return or give up 1.19% of portfolio value over 90 days.

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

Dynamic Total Return  vs.  Dreyfus Midcap Index

Dynamic Total Return

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dynamic Total Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dynamic Total 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

Very Weak

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

Pair Trading with Dynamic Total and Dreyfus Midcap

The main advantage of trading using opposite Dynamic Total and Dreyfus Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic Total 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 Dynamic Total Return 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.