Correlation Between Dreyfus Municipal and Dreyfus Gnma

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Dreyfus Municipal and Dreyfus Gnma 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 Municipal and Dreyfus Gnma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreyfus Municipal Bond and Dreyfus Gnma Fund, you can compare the effects of market volatilities on Dreyfus Municipal and Dreyfus Gnma 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 Municipal with a short position of Dreyfus Gnma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Municipal and Dreyfus Gnma.

Diversification Opportunities for Dreyfus Municipal and Dreyfus Gnma

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between Dreyfus and Dreyfus is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Municipal Bond and Dreyfus Gnma Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Gnma and Dreyfus Municipal 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 Municipal Bond are associated (or correlated) with Dreyfus Gnma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Gnma has no effect on the direction of Dreyfus Municipal i.e., Dreyfus Municipal and Dreyfus Gnma go up and down completely randomly.

Pair Corralation between Dreyfus Municipal and Dreyfus Gnma

Assuming the 90 days horizon Dreyfus Municipal Bond is expected to generate 0.48 times more return on investment than Dreyfus Gnma. However, Dreyfus Municipal Bond is 2.09 times less risky than Dreyfus Gnma. It trades about 0.09 of its potential returns per unit of risk. Dreyfus Gnma Fund is currently generating about 0.03 per unit of risk. If you would invest  1,046  in Dreyfus Municipal Bond on September 25, 2024 and sell it today you would earn a total of  28.00  from holding Dreyfus Municipal Bond or generate 2.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy27.97%
ValuesDaily Returns

Dreyfus Municipal Bond  vs.  Dreyfus Gnma Fund

 Performance 
       Timeline  
Dreyfus Municipal Bond 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Dreyfus Municipal Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dreyfus Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Dreyfus Gnma 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 Municipal and Dreyfus Gnma Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dreyfus Municipal and Dreyfus Gnma

The main advantage of trading using opposite Dreyfus Municipal and Dreyfus Gnma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Municipal position performs unexpectedly, Dreyfus Gnma 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 Gnma will offset losses from the drop in Dreyfus Gnma's long position.
The idea behind Dreyfus Municipal Bond and Dreyfus Gnma 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.
Check out your portfolio center.
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 Global Correlations module to find global opportunities by holding instruments from different markets.

Other Complementary Tools

USA ETFs
Find actively traded Exchange Traded Funds (ETF) in USA
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Equity Valuation
Check real value of public entities based on technical and fundamental data