Correlation Between Dreyfus Research and Strat Petroleum

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

Diversification Opportunities for Dreyfus Research and Strat Petroleum

0.0

Correlation Coefficient

Dreyfus Research  Strat Petroleum

Pay attention - limited upside

The 3 months correlation between Dreyfus and Strat is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Research Growth and Strat Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strat Petroleum 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 Strat Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strat Petroleum has no effect on the direction of Dreyfus Research i.e., Dreyfus Research and Strat Petroleum go up and down completely randomly.

Pair Corralation between Dreyfus Research and Strat Petroleum

Assuming the 90 days horizon Dreyfus Research is expected to generate 20.13 times less return on investment than Strat Petroleum. But when comparing it to its historical volatility, Dreyfus Research Growth is 43.53 times less risky than Strat Petroleum. It trades about 0.09 of its potential returns per unit of risk. Strat Petroleum is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Strat Petroleum on October 5, 2024 and sell it today you would lose (0.01) from holding Strat Petroleum or give up 80.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Dreyfus Research Growth  vs.  Strat Petroleum

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.

Strat Petroleum

Risk-Adjusted Performance

10 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strat Petroleum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Strat Petroleum disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dreyfus Research and Strat Petroleum

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

The idea behind Dreyfus Research Growth and Strat Petroleum 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.