Correlation Between Dreyfus Institutional and Dreyfus Tax

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

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

Diversification Opportunities for Dreyfus Institutional and Dreyfus Tax

0.08

Correlation Coefficient

Dreyfus Institutional  Dreyfus Tax

Significant diversification

The 3 months correlation between Dreyfus and Dreyfus is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Institutional Sp and Dreyfus Tax Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Tax Managed and Dreyfus Institutional 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 Institutional Sp are associated (or correlated) with Dreyfus Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Tax Managed has no effect on the direction of Dreyfus Institutional i.e., Dreyfus Institutional and Dreyfus Tax go up and down completely randomly.

Pair Corralation between Dreyfus Institutional and Dreyfus Tax

Assuming the 90 days horizon Dreyfus Institutional Sp is expected to generate 0.28 times more return on investment than Dreyfus Tax. However, Dreyfus Institutional Sp is 3.61 times less risky than Dreyfus Tax. It trades about 0.07 of its potential returns per unit of risk. Dreyfus Tax Managed is currently generating about -0.22 per unit of risk. If you would invest  5,173  in Dreyfus Institutional Sp on September 25, 2024 and sell it today you would earn a total of  62.00  from holding Dreyfus Institutional Sp or generate 1.2% return on investment over 90 days.

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

Dreyfus Institutional Sp  vs.  Dreyfus Tax Managed

Dreyfus Institutional

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfus Institutional Sp has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Dreyfus Tax Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfus Tax Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Dreyfus Institutional and Dreyfus Tax

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

The idea behind Dreyfus Institutional Sp and Dreyfus Tax Managed 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.