Correlation Between Inverse High and Dreyfus Short

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

By analyzing existing cross correlation between Inverse High Yield and Dreyfus Short Intermediate, you can compare the effects of market volatilities on Inverse High and Dreyfus Short 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 Inverse High with a short position of Dreyfus Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse High and Dreyfus Short.

Diversification Opportunities for Inverse High and Dreyfus Short

-0.86

Correlation Coefficient

Inverse High  Dreyfus Short

Pay attention - limited upside

The 3 months correlation between Inverse and Dreyfus is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Inverse High Yield and Dreyfus Short Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Short Interm and Inverse High 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 Inverse High Yield are associated (or correlated) with Dreyfus Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Short Interm has no effect on the direction of Inverse High i.e., Inverse High and Dreyfus Short go up and down completely randomly.

Pair Corralation between Inverse High and Dreyfus Short

Assuming the 90 days horizon Inverse High Yield is expected to generate 3.03 times more return on investment than Dreyfus Short. However, Inverse High is 3.03 times more volatile than Dreyfus Short Intermediate. It trades about 0.28 of its potential returns per unit of risk. Dreyfus Short Intermediate is currently generating about -0.22 per unit of risk. If you would invest  4,898  in Inverse High Yield on October 9, 2024 and sell it today you would earn a total of  89.00  from holding Inverse High Yield or generate 1.82% return on investment over 90 days.

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

Inverse High Yield  vs.  Dreyfus Short Intermediate

Inverse High Yield

Risk-Adjusted Performance

5 of 100

Modest

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

Dreyfus Short Interm

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Inverse High and Dreyfus Short

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

The idea behind Inverse High Yield and Dreyfus Short Intermediate 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.