Correlation Between Dreyfus Natural and Aqr Managed

Can any of the company-specific risk be diversified away by investing in both Dreyfus Natural and Aqr Managed 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 Aqr Managed 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 Aqr Managed Futures, you can compare the effects of market volatilities on Dreyfus Natural and Aqr Managed 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 Aqr Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Natural and Aqr Managed.

Diversification Opportunities for Dreyfus Natural and Aqr Managed

0.11

Correlation Coefficient

Dreyfus Natural  Aqr Managed

Average diversification

The 3 months correlation between Dreyfus and Aqr is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Natural Resources and Aqr Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Managed Futures 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 Aqr Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Managed Futures has no effect on the direction of Dreyfus Natural i.e., Dreyfus Natural and Aqr Managed go up and down completely randomly.

Pair Corralation between Dreyfus Natural and Aqr Managed

Assuming the 90 days horizon Dreyfus Natural Resources is expected to under-perform the Aqr Managed. In addition to that, Dreyfus Natural is 2.21 times more volatile than Aqr Managed Futures. It trades about -0.22 of its total potential returns per unit of risk. Aqr Managed Futures is currently generating about 0.14 per unit of volatility. If you would invest  820.00  in Aqr Managed Futures on September 12, 2024 and sell it today you would earn a total of  22.00  from holding Aqr Managed Futures or generate 2.68% return on investment over 90 days.

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

Dreyfus Natural Resources  vs.  Aqr Managed Futures

Dreyfus Natural Resources

Risk-Adjusted Performance

0 of 100

Weak

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

Aqr Managed Futures

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Managed Futures are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Managed 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 Aqr Managed

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

The idea behind Dreyfus Natural Resources and Aqr Managed Futures 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.