Correlation Between Oil Gas and Dreyfus Government

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

By analyzing existing cross correlation between Oil Gas Ultrasector and Dreyfus Government Cash, you can compare the effects of market volatilities on Oil Gas and Dreyfus Government 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 Oil Gas with a short position of Dreyfus Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Gas and Dreyfus Government.

Diversification Opportunities for Oil Gas and Dreyfus Government

0.04

Correlation Coefficient

Oil Gas  Dreyfus Government

Significant diversification

The 3 months correlation between Oil and Dreyfus is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Dreyfus Government Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Government Cash and Oil Gas 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 Oil Gas Ultrasector are associated (or correlated) with Dreyfus Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Government Cash has no effect on the direction of Oil Gas i.e., Oil Gas and Dreyfus Government go up and down completely randomly.

Pair Corralation between Oil Gas and Dreyfus Government

Assuming the 90 days horizon Oil Gas Ultrasector is expected to generate 13.3 times more return on investment than Dreyfus Government. However, Oil Gas is 13.3 times more volatile than Dreyfus Government Cash. It trades about 0.04 of its potential returns per unit of risk. Dreyfus Government Cash is currently generating about 0.13 per unit of risk. If you would invest  3,587  in Oil Gas Ultrasector on October 25, 2024 and sell it today you would earn a total of  132.00  from holding Oil Gas Ultrasector or generate 3.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Oil Gas Ultrasector  vs.  Dreyfus Government Cash

Oil Gas Ultrasector

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Gas Ultrasector are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Oil Gas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Government Cash

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Government Cash are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dreyfus Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oil Gas and Dreyfus Government

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

The idea behind Oil Gas Ultrasector and Dreyfus Government Cash 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.