Correlation Between Dreyfus Natural and Dow Jones

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

Diversification Opportunities for Dreyfus Natural and Dow Jones

0.41

Correlation Coefficient

Dreyfus Natural  Dow Jones

Very weak diversification

The 3 months correlation between DREYFUS and Dow is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Natural Resources and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Dreyfus Natural i.e., Dreyfus Natural and Dow Jones go up and down completely randomly.

Pair Corralation between Dreyfus Natural and Dow Jones

Assuming the 90 days horizon Dreyfus Natural Resources is expected to under-perform the Dow Jones. In addition to that, Dreyfus Natural is 2.01 times more volatile than Dow Jones Industrial. It trades about -0.03 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of volatility. If you would invest  7,722  in Dow Jones Industrial on October 4, 2024 and sell it today you would earn a total of  1,602  from holding Dow Jones Industrial or generate 20.75% return on investment over 90 days.

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

Dreyfus Natural Resources  vs.  Dow Jones Industrial

Dreyfus Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfus Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Dow Jones Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dow Jones Industrial has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Dow Jones 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 Dow Jones

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

The idea behind Dreyfus Natural Resources and Dow Jones Industrial 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.