Correlation Between The Bond and Dreyfus International

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

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

Diversification Opportunities for The Bond and Dreyfus International

0.8

Correlation Coefficient

The Bond  Dreyfus International

Very poor diversification

The 3 months correlation between The and Dreyfus is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding The Bond Fund and Dreyfus International Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus International and The Bond 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 The Bond Fund are associated (or correlated) with Dreyfus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus International has no effect on the direction of The Bond i.e., The Bond and Dreyfus International go up and down completely randomly.

Pair Corralation between The Bond and Dreyfus International

Assuming the 90 days horizon The Bond Fund is expected to generate 0.52 times more return on investment than Dreyfus International. However, The Bond Fund is 1.93 times less risky than Dreyfus International. It trades about -0.09 of its potential returns per unit of risk. Dreyfus International Bond is currently generating about -0.2 per unit of risk. If you would invest  1,779  in The Bond Fund on October 8, 2024 and sell it today you would lose (19.00) from holding The Bond Fund or give up 1.07% of portfolio value over 90 days.

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

The Bond Fund  vs.  Dreyfus International Bond

Bond Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dreyfus International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfus International Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with The Bond and Dreyfus International

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

The idea behind The Bond Fund and Dreyfus International Bond 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.