Correlation Between NYSE Composite and Dreyfus Municipal
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Dreyfus Municipal 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 NYSE Composite and Dreyfus Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Dreyfus Municipal Bond, you can compare the effects of market volatilities on NYSE Composite and Dreyfus Municipal 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 NYSE Composite with a short position of Dreyfus Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Dreyfus Municipal.
Diversification Opportunities for NYSE Composite and Dreyfus Municipal
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and Dreyfus is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Dreyfus Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Municipal Bond and NYSE Composite 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 NYSE Composite are associated (or correlated) with Dreyfus Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Municipal Bond has no effect on the direction of NYSE Composite i.e., NYSE Composite and Dreyfus Municipal go up and down completely randomly.
Pair Corralation between NYSE Composite and Dreyfus Municipal
Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.05 times more return on investment than Dreyfus Municipal. However, NYSE Composite is 3.05 times more volatile than Dreyfus Municipal Bond. It trades about 0.07 of its potential returns per unit of risk. Dreyfus Municipal Bond is currently generating about 0.05 per unit of risk. If you would invest 1,515,445 in NYSE Composite on September 24, 2024 and sell it today you would earn a total of 396,499 from holding NYSE Composite or generate 26.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
NYSE Composite vs. Dreyfus Municipal Bond
Performance |
Timeline |
NYSE Composite and Dreyfus Municipal Volatility Contrast
Predicted Return Density |
Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Dreyfus Municipal Bond
Pair trading matchups for Dreyfus Municipal
Pair Trading with NYSE Composite and Dreyfus Municipal
The main advantage of trading using opposite NYSE Composite and Dreyfus Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Dreyfus Municipal 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 Municipal will offset losses from the drop in Dreyfus Municipal's long position.NYSE Composite vs. Kulicke and Soffa | NYSE Composite vs. United Microelectronics | NYSE Composite vs. Chester Mining | NYSE Composite vs. NetEase |
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Check out your portfolio center.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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