Correlation Between Multimanager Lifestyle and Dreyfus Government

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

By analyzing existing cross correlation between Multimanager Lifestyle Servative and Dreyfus Government Cash, you can compare the effects of market volatilities on Multimanager Lifestyle and Dreyfus Government 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 Multimanager Lifestyle with a short position of Dreyfus Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multimanager Lifestyle and Dreyfus Government.

Diversification Opportunities for Multimanager Lifestyle and Dreyfus Government

-0.09

Correlation Coefficient

Multimanager Lifestyle  Dreyfus Government

Good diversification

The 3 months correlation between Multimanager and Dreyfus is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Multimanager Lifestyle Servati and Dreyfus Government Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Government Cash and Multimanager Lifestyle 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 Multimanager Lifestyle Servative are associated (or correlated) with Dreyfus Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Government Cash has no effect on the direction of Multimanager Lifestyle i.e., Multimanager Lifestyle and Dreyfus Government go up and down completely randomly.

Pair Corralation between Multimanager Lifestyle and Dreyfus Government

Assuming the 90 days horizon Multimanager Lifestyle Servative is expected to generate 0.94 times more return on investment than Dreyfus Government. However, Multimanager Lifestyle Servative is 1.07 times less risky than Dreyfus Government. It trades about 0.1 of its potential returns per unit of risk. Dreyfus Government Cash is currently generating about 0.06 per unit of risk. If you would invest  1,112  in Multimanager Lifestyle Servative on October 24, 2024 and sell it today you would earn a total of  76.00  from holding Multimanager Lifestyle Servative or generate 6.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Multimanager Lifestyle Servati  vs.  Dreyfus Government Cash

Multimanager Lifestyle

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Multimanager Lifestyle Servative are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multimanager Lifestyle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Government Cash

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Government Cash are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dreyfus Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Multimanager Lifestyle and Dreyfus Government

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

The idea behind Multimanager Lifestyle Servative and Dreyfus Government Cash 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.