Correlation Between American Funds and Dreyfus Tax

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

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

Diversification Opportunities for American Funds and Dreyfus Tax

0.67

Correlation Coefficient

American Funds  Dreyfus Tax

Poor diversification

The 3 months correlation between American and Dreyfus is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Funds The 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 American Funds 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 American Funds The 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 American Funds i.e., American Funds and Dreyfus Tax go up and down completely randomly.

Pair Corralation between American Funds and Dreyfus Tax

Assuming the 90 days horizon American Funds The is expected to generate 0.6 times more return on investment than Dreyfus Tax. However, American Funds The is 1.67 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 -0.15 per unit of risk. If you would invest  7,554  in American Funds The on December 27, 2024 and sell it today you would lose (409.00) from holding American Funds The or give up 5.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

American Funds The  vs.  Dreyfus Tax Managed

American Funds

Risk-Adjusted Performance

Very Weak

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

Dreyfus Tax Managed

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with American Funds and Dreyfus Tax

The main advantage of trading using opposite American Funds and Dreyfus Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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 American Funds The 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.