Correlation Between Dreyfus Gnma and Dreyfus Equity

Can any of the company-specific risk be diversified away by investing in both Dreyfus Gnma 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 Gnma 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 Gnma Fund and Dreyfus Equity Income, you can compare the effects of market volatilities on Dreyfus Gnma 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 Gnma with a short position of Dreyfus Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Gnma and Dreyfus Equity.

Diversification Opportunities for Dreyfus Gnma and Dreyfus Equity

-0.76

Correlation Coefficient

Dreyfus Gnma  Dreyfus Equity

Pay attention - limited upside

The 3 months correlation between Dreyfus and Dreyfus is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Gnma Fund 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 Gnma 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 Gnma Fund 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 Gnma i.e., Dreyfus Gnma and Dreyfus Equity go up and down completely randomly.

Pair Corralation between Dreyfus Gnma and Dreyfus Equity

Assuming the 90 days horizon Dreyfus Gnma Fund is expected to under-perform the Dreyfus Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dreyfus Gnma Fund is 2.12 times less risky than Dreyfus Equity. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Dreyfus Equity Income is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,017  in Dreyfus Equity Income on August 31, 2024 and sell it today you would earn a total of  229.00  from holding Dreyfus Equity Income or generate 7.59% return on investment over 90 days.

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

Dreyfus Gnma Fund  vs.  Dreyfus Equity Income

Dreyfus Gnma

Risk-Adjusted Performance

0 of 100

Very Weak

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

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Equity Income are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Dreyfus Equity may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Dreyfus Gnma and Dreyfus Equity

The main advantage of trading using opposite Dreyfus Gnma and Dreyfus Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Gnma 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 Gnma Fund 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.