Correlation Between Dreyfus Natural and Mainstay Tax

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

By analyzing existing cross correlation between Dreyfus Natural Resources and Mainstay Tax Free, you can compare the effects of market volatilities on Dreyfus Natural and Mainstay Tax 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 Natural with a short position of Mainstay Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Natural and Mainstay Tax.

Diversification Opportunities for Dreyfus Natural and Mainstay Tax

-0.03

Correlation Coefficient

Dreyfus Natural  Mainstay Tax

Good diversification

The 3 months correlation between Dreyfus and Mainstay is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Natural Resources and Mainstay Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Tax Free and Dreyfus Natural 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 Natural Resources are associated (or correlated) with Mainstay Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Tax Free has no effect on the direction of Dreyfus Natural i.e., Dreyfus Natural and Mainstay Tax go up and down completely randomly.

Pair Corralation between Dreyfus Natural and Mainstay Tax

Assuming the 90 days horizon Dreyfus Natural Resources is expected to generate 4.31 times more return on investment than Mainstay Tax. However, Dreyfus Natural is 4.31 times more volatile than Mainstay Tax Free. It trades about 0.13 of its potential returns per unit of risk. Mainstay Tax Free is currently generating about 0.06 per unit of risk. If you would invest  4,028  in Dreyfus Natural Resources on September 4, 2024 and sell it today you would earn a total of  361.00  from holding Dreyfus Natural Resources or generate 8.96% return on investment over 90 days.

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

Dreyfus Natural Resources  vs.  Mainstay Tax Free

Dreyfus Natural Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Natural Resources are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Dreyfus Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mainstay Tax Free

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Dreyfus Natural and Mainstay Tax

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

The idea behind Dreyfus Natural Resources and Mainstay Tax Free 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.