Correlation Between Vanguard Small-cap and Dreyfus Select

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

By analyzing existing cross correlation between Vanguard Small Cap Index and Dreyfus Select Managers, you can compare the effects of market volatilities on Vanguard Small-cap and Dreyfus Select 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 Vanguard Small-cap with a short position of Dreyfus Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Dreyfus Select.

Diversification Opportunities for Vanguard Small-cap and Dreyfus Select

-0.48

Correlation Coefficient

Vanguard Small-cap  Dreyfus Select

Very good diversification

The 3 months correlation between Vanguard and Dreyfus is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Dreyfus Select Managers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Select Managers and Vanguard Small-cap 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 Vanguard Small Cap Index are associated (or correlated) with Dreyfus Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Select Managers has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Dreyfus Select go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Dreyfus Select

If you would invest  11,585  in Vanguard Small Cap Index on October 21, 2024 and sell it today you would earn a total of  318.00  from holding Vanguard Small Cap Index or generate 2.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	5.26%
Values	Daily Returns

Vanguard Small Cap Index  vs.  Dreyfus Select Managers

Vanguard Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Small-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Select Managers

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Small-cap and Dreyfus Select

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

The idea behind Vanguard Small Cap Index and Dreyfus Select Managers 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.