Correlation Between IShares MSCI and Dreyfus Research

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

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

Diversification Opportunities for IShares MSCI and Dreyfus Research

0.93

Correlation Coefficient

IShares MSCI  Dreyfus Research

Almost no diversification

The 3 months correlation between IShares and Dreyfus is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Dreyfus Research Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Research Growth and IShares MSCI 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 iShares MSCI USA are associated (or correlated) with Dreyfus Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Research Growth has no effect on the direction of IShares MSCI i.e., IShares MSCI and Dreyfus Research go up and down completely randomly.

Pair Corralation between IShares MSCI and Dreyfus Research

Given the investment horizon of 90 days iShares MSCI USA is expected to generate 1.04 times more return on investment than Dreyfus Research. However, IShares MSCI is 1.04 times more volatile than Dreyfus Research Growth. It trades about 0.11 of its potential returns per unit of risk. Dreyfus Research Growth is currently generating about 0.09 per unit of risk. If you would invest  15,089  in iShares MSCI USA on October 5, 2024 and sell it today you would earn a total of  5,858  from holding iShares MSCI USA or generate 38.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.63%
Values	Daily Returns

iShares MSCI USA  vs.  Dreyfus Research Growth

iShares MSCI USA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Dreyfus Research Growth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Research Growth are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dreyfus Research is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and Dreyfus Research

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

The idea behind iShares MSCI USA and Dreyfus Research Growth 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.