Correlation Between Dreyfus Active and International Stock

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

Diversification Opportunities for Dreyfus Active and International Stock

0.68

Correlation Coefficient

Dreyfus Active  International Stock

Poor diversification

The 3 months correlation between Dreyfus and International is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Active Midcap and International Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Stock 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 International Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Stock has no effect on the direction of Dreyfus Active i.e., Dreyfus Active and International Stock go up and down completely randomly.

Pair Corralation between Dreyfus Active and International Stock

Assuming the 90 days horizon Dreyfus Active Midcap is expected to under-perform the International Stock. In addition to that, Dreyfus Active is 1.44 times more volatile than International Stock Fund. It trades about -0.16 of its total potential returns per unit of risk. International Stock Fund is currently generating about -0.01 per unit of volatility. If you would invest  2,402  in International Stock Fund on November 28, 2024 and sell it today you would lose (13.00) from holding International Stock Fund or give up 0.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Dreyfus Active Midcap  vs.  International Stock Fund

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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

International Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, International Stock 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 International Stock

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

The idea behind Dreyfus Active Midcap and International Stock Fund 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.