Correlation Between Growth Fund and Dreyfus Appreciation

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

By analyzing existing cross correlation between Growth Fund Of and Dreyfus Appreciation Fund, you can compare the effects of market volatilities on Growth Fund and Dreyfus Appreciation 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 Growth Fund with a short position of Dreyfus Appreciation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Dreyfus Appreciation.

Diversification Opportunities for Growth Fund and Dreyfus Appreciation

0.86

Correlation Coefficient

Growth Fund  Dreyfus Appreciation

Very poor diversification

The 3 months correlation between Growth and Dreyfus is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Dreyfus Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Appreciation and Growth Fund 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 Growth Fund Of are associated (or correlated) with Dreyfus Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Appreciation has no effect on the direction of Growth Fund i.e., Growth Fund and Dreyfus Appreciation go up and down completely randomly.

Pair Corralation between Growth Fund and Dreyfus Appreciation

Assuming the 90 days horizon Growth Fund Of is expected to generate 1.32 times more return on investment than Dreyfus Appreciation. However, Growth Fund is 1.32 times more volatile than Dreyfus Appreciation Fund. It trades about 0.11 of its potential returns per unit of risk. Dreyfus Appreciation Fund is currently generating about 0.1 per unit of risk. If you would invest  4,869  in Growth Fund Of on September 12, 2024 and sell it today you would earn a total of  3,396  from holding Growth Fund Of or generate 69.75% return on investment over 90 days.

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

Growth Fund Of  vs.  Dreyfus Appreciation Fund

Growth Fund

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund Of are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Growth Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dreyfus Appreciation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Appreciation Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dreyfus Appreciation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Growth Fund and Dreyfus Appreciation

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

The idea behind Growth Fund Of and Dreyfus Appreciation Fund 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.