Correlation Between Dreyfus Opportunistic and American Beacon

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

By analyzing existing cross correlation between Dreyfus Opportunistic Midcap and American Beacon Balanced, you can compare the effects of market volatilities on Dreyfus Opportunistic and American Beacon 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 Opportunistic with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Opportunistic and American Beacon.

Diversification Opportunities for Dreyfus Opportunistic and American Beacon

0.76

Correlation Coefficient

Dreyfus Opportunistic  American Beacon

Poor diversification

The 3 months correlation between Dreyfus and American is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Opportunistic Midcap and American Beacon Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Balanced and Dreyfus Opportunistic 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 Opportunistic Midcap are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Balanced has no effect on the direction of Dreyfus Opportunistic i.e., Dreyfus Opportunistic and American Beacon go up and down completely randomly.

Pair Corralation between Dreyfus Opportunistic and American Beacon

Assuming the 90 days horizon Dreyfus Opportunistic Midcap is expected to under-perform the American Beacon. In addition to that, Dreyfus Opportunistic is 3.14 times more volatile than American Beacon Balanced. It trades about -0.05 of its total potential returns per unit of risk. American Beacon Balanced is currently generating about 0.08 per unit of volatility. If you would invest  1,595  in American Beacon Balanced on September 15, 2024 and sell it today you would earn a total of  32.00  from holding American Beacon Balanced or generate 2.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Dreyfus Opportunistic Midcap  vs.  American Beacon Balanced

Dreyfus Opportunistic

Risk-Adjusted Performance

0 of 100

Very Weak

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

American Beacon Balanced

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Balanced are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Beacon 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 Opportunistic and American Beacon

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

The idea behind Dreyfus Opportunistic Midcap and American Beacon Balanced 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.