Correlation Between Financial Industries and Dreyfus/newton International

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

By analyzing existing cross correlation between Financial Industries Fund and Dreyfusnewton International Equity, you can compare the effects of market volatilities on Financial Industries and Dreyfus/newton International 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 Financial Industries with a short position of Dreyfus/newton International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Dreyfus/newton International.

Diversification Opportunities for Financial Industries and Dreyfus/newton International

0.66

Correlation Coefficient

Financial Industries  Dreyfus/newton International

Poor diversification

The 3 months correlation between Financial and Dreyfus/newton is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Dreyfusnewton International Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus/newton International and Financial Industries 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 Financial Industries Fund are associated (or correlated) with Dreyfus/newton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus/newton International has no effect on the direction of Financial Industries i.e., Financial Industries and Dreyfus/newton International go up and down completely randomly.

Pair Corralation between Financial Industries and Dreyfus/newton International

Assuming the 90 days horizon Financial Industries Fund is expected to generate 0.4 times more return on investment than Dreyfus/newton International. However, Financial Industries Fund is 2.53 times less risky than Dreyfus/newton International. It trades about 0.02 of its potential returns per unit of risk. Dreyfusnewton International Equity is currently generating about -0.12 per unit of risk. If you would invest  1,879  in Financial Industries Fund on October 25, 2024 and sell it today you would earn a total of  15.00  from holding Financial Industries Fund or generate 0.8% return on investment over 90 days.

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

Financial Industries Fund  vs.  Dreyfusnewton International Eq

Financial Industries

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Industries Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Financial Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus/newton International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfusnewton International Equity 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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Financial Industries and Dreyfus/newton International

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

The idea behind Financial Industries Fund and Dreyfusnewton International Equity 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.