Correlation Between Morningstar Defensive and Dreyfus Amt

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

By analyzing existing cross correlation between Morningstar Defensive Bond and Dreyfus Amt Free Municipal, you can compare the effects of market volatilities on Morningstar Defensive and Dreyfus Amt 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 Morningstar Defensive with a short position of Dreyfus Amt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Defensive and Dreyfus Amt.

Diversification Opportunities for Morningstar Defensive and Dreyfus Amt

0.58

Correlation Coefficient

Morningstar Defensive  Dreyfus Amt

Very weak diversification

The 3 months correlation between Morningstar and Dreyfus is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Defensive Bond and Dreyfus Amt Free Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Amt Free and Morningstar Defensive 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 Morningstar Defensive Bond are associated (or correlated) with Dreyfus Amt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Amt Free has no effect on the direction of Morningstar Defensive i.e., Morningstar Defensive and Dreyfus Amt go up and down completely randomly.

Pair Corralation between Morningstar Defensive and Dreyfus Amt

Assuming the 90 days horizon Morningstar Defensive Bond is expected to generate 0.62 times more return on investment than Dreyfus Amt. However, Morningstar Defensive Bond is 1.62 times less risky than Dreyfus Amt. It trades about 0.13 of its potential returns per unit of risk. Dreyfus Amt Free Municipal is currently generating about 0.04 per unit of risk. If you would invest  948.00  in Morningstar Defensive Bond on September 25, 2024 and sell it today you would earn a total of  22.00  from holding Morningstar Defensive Bond or generate 2.32% return on investment over 90 days.

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

Morningstar Defensive Bond  vs.  Dreyfus Amt Free Municipal

Morningstar Defensive

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dreyfus Amt Free

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Morningstar Defensive and Dreyfus Amt

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

The idea behind Morningstar Defensive Bond and Dreyfus Amt Free Municipal 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 Transaction History module to view history of all your transactions and understand their impact on performance.