Correlation Between Fidelity Series and Dreyfus Natural

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

By analyzing existing cross correlation between Fidelity Series 1000 and Dreyfus Natural Resources, you can compare the effects of market volatilities on Fidelity Series and Dreyfus Natural 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 Fidelity Series with a short position of Dreyfus Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Series and Dreyfus Natural.

Diversification Opportunities for Fidelity Series and Dreyfus Natural

0.8

Correlation Coefficient

Fidelity Series  Dreyfus Natural

Very poor diversification

The 3 months correlation between Fidelity and Dreyfus is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Series 1000 and Dreyfus Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Natural Resources and Fidelity Series 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 Fidelity Series 1000 are associated (or correlated) with Dreyfus Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Natural Resources has no effect on the direction of Fidelity Series i.e., Fidelity Series and Dreyfus Natural go up and down completely randomly.

Pair Corralation between Fidelity Series and Dreyfus Natural

Assuming the 90 days horizon Fidelity Series is expected to generate 1.19 times less return on investment than Dreyfus Natural. But when comparing it to its historical volatility, Fidelity Series 1000 is 1.65 times less risky than Dreyfus Natural. It trades about 0.18 of its potential returns per unit of risk. Dreyfus Natural Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,006  in Dreyfus Natural Resources on September 5, 2024 and sell it today you would earn a total of  360.00  from holding Dreyfus Natural Resources or generate 8.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Fidelity Series 1000  vs.  Dreyfus Natural Resources

Fidelity Series 1000

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series 1000 are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Series may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dreyfus Natural Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Natural Resources are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Dreyfus Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity Series and Dreyfus Natural

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

The idea behind Fidelity Series 1000 and Dreyfus Natural Resources 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.