Correlation Between Dreyfus Strategic and Dreyfus Smallcap

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

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

Diversification Opportunities for Dreyfus Strategic and Dreyfus Smallcap

0.37

Correlation Coefficient

Dreyfus Strategic  Dreyfus Smallcap

Weak diversification

The 3 months correlation between Dreyfus and Dreyfus is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Strategic Value and Dreyfus Smallcap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Smallcap Stock and Dreyfus Strategic 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 Dreyfus Strategic Value are associated (or correlated) with Dreyfus Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Smallcap Stock has no effect on the direction of Dreyfus Strategic i.e., Dreyfus Strategic and Dreyfus Smallcap go up and down completely randomly.

Pair Corralation between Dreyfus Strategic and Dreyfus Smallcap

Assuming the 90 days horizon Dreyfus Strategic Value is expected to under-perform the Dreyfus Smallcap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dreyfus Strategic Value is 1.03 times less risky than Dreyfus Smallcap. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Dreyfus Smallcap Stock is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,779  in Dreyfus Smallcap Stock on September 17, 2024 and sell it today you would earn a total of  184.00  from holding Dreyfus Smallcap Stock or generate 6.62% return on investment over 90 days.

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

Dreyfus Strategic Value  vs.  Dreyfus Smallcap Stock

Dreyfus Strategic Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dreyfus Smallcap Stock

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Smallcap Stock are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus Smallcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dreyfus Strategic and Dreyfus Smallcap

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

The idea behind Dreyfus Strategic Value and Dreyfus Smallcap Stock 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.