Correlation Between Fulcrum Diversified and Dreyfus Bond

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

By analyzing existing cross correlation between Fulcrum Diversified Absolute and Dreyfus Bond Market, you can compare the effects of market volatilities on Fulcrum Diversified and Dreyfus Bond 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 Fulcrum Diversified with a short position of Dreyfus Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fulcrum Diversified and Dreyfus Bond.

Diversification Opportunities for Fulcrum Diversified and Dreyfus Bond

-0.08

Correlation Coefficient

Fulcrum Diversified  Dreyfus Bond

Good diversification

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

Pair Corralation between Fulcrum Diversified and Dreyfus Bond

Assuming the 90 days horizon Fulcrum Diversified Absolute is expected to under-perform the Dreyfus Bond. In addition to that, Fulcrum Diversified is 1.22 times more volatile than Dreyfus Bond Market. It trades about -0.02 of its total potential returns per unit of risk. Dreyfus Bond Market is currently generating about 0.15 per unit of volatility. If you would invest  879.00  in Dreyfus Bond Market on December 20, 2024 and sell it today you would earn a total of  24.00  from holding Dreyfus Bond Market or generate 2.73% return on investment over 90 days.

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

Fulcrum Diversified Absolute  vs.  Dreyfus Bond Market

Fulcrum Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fulcrum Diversified Absolute has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fulcrum Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Bond Market

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Bond Market are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dreyfus Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fulcrum Diversified and Dreyfus Bond

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

The idea behind Fulcrum Diversified Absolute and Dreyfus Bond Market 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.