Correlation Between Ab Small and Dreyfus Technology

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

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

Diversification Opportunities for Ab Small and Dreyfus Technology

0.78

Correlation Coefficient

Ab Small  Dreyfus Technology

Poor diversification

The 3 months correlation between QUAKX and Dreyfus is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Dreyfus Technology Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Technology Growth and Ab Small 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 Ab Small Cap are associated (or correlated) with Dreyfus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Technology Growth has no effect on the direction of Ab Small i.e., Ab Small and Dreyfus Technology go up and down completely randomly.

Pair Corralation between Ab Small and Dreyfus Technology

Assuming the 90 days horizon Ab Small is expected to generate 2.24 times less return on investment than Dreyfus Technology. But when comparing it to its historical volatility, Ab Small Cap is 1.09 times less risky than Dreyfus Technology. It trades about 0.05 of its potential returns per unit of risk. Dreyfus Technology Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,329  in Dreyfus Technology Growth on October 4, 2024 and sell it today you would earn a total of  2,804  from holding Dreyfus Technology Growth or generate 84.23% return on investment over 90 days.

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

Ab Small Cap  vs.  Dreyfus Technology Growth

Ab Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Ab Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Technology Growth

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Ab Small and Dreyfus Technology

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

The idea behind Ab Small Cap and Dreyfus Technology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.