Correlation Between Dreyfus Active and Dreyfus Equity

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

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

Diversification Opportunities for Dreyfus Active and Dreyfus Equity

0.97

Correlation Coefficient

Dreyfus Active  Dreyfus Equity

Almost no diversification

The 3 months correlation between Dreyfus and Dreyfus is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Active Midcap and Dreyfus Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Equity Income and Dreyfus Active 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 Active Midcap are associated (or correlated) with Dreyfus Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Equity Income has no effect on the direction of Dreyfus Active i.e., Dreyfus Active and Dreyfus Equity go up and down completely randomly.

Pair Corralation between Dreyfus Active and Dreyfus Equity

Assuming the 90 days horizon Dreyfus Active Midcap is expected to under-perform the Dreyfus Equity. In addition to that, Dreyfus Active is 1.2 times more volatile than Dreyfus Equity Income. It trades about -0.08 of its total potential returns per unit of risk. Dreyfus Equity Income is currently generating about -0.07 per unit of volatility. If you would invest  3,037  in Dreyfus Equity Income on December 30, 2024 and sell it today you would lose (133.00) from holding Dreyfus Equity Income or give up 4.38% of portfolio value over 90 days.

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

Dreyfus Active Midcap  vs.  Dreyfus Equity Income

Dreyfus Active Midcap

Risk-Adjusted Performance

Very Weak

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

Dreyfus Equity Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dreyfus Equity Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Dreyfus Equity 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 Active and Dreyfus Equity

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

The idea behind Dreyfus Active Midcap and Dreyfus Equity Income 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.