Correlation Between Dreyfus Equity and Dreyfus Appreciation

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

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

Diversification Opportunities for Dreyfus Equity and Dreyfus Appreciation

0.94

Correlation Coefficient

Dreyfus Equity  Dreyfus Appreciation

Almost no diversification

The 3 months correlation between Dreyfus and Dreyfus is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Equity Income and Dreyfus Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Appreciation and Dreyfus Equity 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 Equity Income are associated (or correlated) with Dreyfus Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Appreciation has no effect on the direction of Dreyfus Equity i.e., Dreyfus Equity and Dreyfus Appreciation go up and down completely randomly.

Pair Corralation between Dreyfus Equity and Dreyfus Appreciation

Assuming the 90 days horizon Dreyfus Equity Income is expected to under-perform the Dreyfus Appreciation. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dreyfus Equity Income is 1.01 times less risky than Dreyfus Appreciation. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Dreyfus Appreciation Fund is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  3,904  in Dreyfus Appreciation Fund on December 29, 2024 and sell it today you would lose (154.00) from holding Dreyfus Appreciation Fund or give up 3.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Dreyfus Equity Income  vs.  Dreyfus Appreciation Fund

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 basic indicators, Dreyfus Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Appreciation

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Dreyfus Equity Income and Dreyfus Appreciation 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.