Correlation Between Dreyfus Research and Sabine Royalty

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

By analyzing existing cross correlation between Dreyfus Research Growth and Sabine Royalty Trust, you can compare the effects of market volatilities on Dreyfus Research and Sabine Royalty 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 Research with a short position of Sabine Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Research and Sabine Royalty.

Diversification Opportunities for Dreyfus Research and Sabine Royalty

0.63

Correlation Coefficient

Dreyfus Research  Sabine Royalty

Poor diversification

The 3 months correlation between Dreyfus and Sabine is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Research Growth and Sabine Royalty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabine Royalty Trust and Dreyfus Research 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 Research Growth are associated (or correlated) with Sabine Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabine Royalty Trust has no effect on the direction of Dreyfus Research i.e., Dreyfus Research and Sabine Royalty go up and down completely randomly.

Pair Corralation between Dreyfus Research and Sabine Royalty

Assuming the 90 days horizon Dreyfus Research is expected to generate 1.46 times less return on investment than Sabine Royalty. But when comparing it to its historical volatility, Dreyfus Research Growth is 1.21 times less risky than Sabine Royalty. It trades about 0.06 of its potential returns per unit of risk. Sabine Royalty Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,158  in Sabine Royalty Trust on October 5, 2024 and sell it today you would earn a total of  358.00  from holding Sabine Royalty Trust or generate 5.81% return on investment over 90 days.

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

Dreyfus Research Growth  vs.  Sabine Royalty Trust

Dreyfus Research Growth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Research Growth are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dreyfus Research is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sabine Royalty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Sabine Royalty may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dreyfus Research and Sabine Royalty

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

The idea behind Dreyfus Research Growth and Sabine Royalty Trust 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.