Correlation Between Energy Services and Dreyfus New

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

By analyzing existing cross correlation between Energy Services Fund and Dreyfus New Jersey, you can compare the effects of market volatilities on Energy Services and Dreyfus New 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 Energy Services with a short position of Dreyfus New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Dreyfus New.

Diversification Opportunities for Energy Services and Dreyfus New

0.02

Correlation Coefficient

Energy Services  Dreyfus New

Significant diversification

The 3 months correlation between Energy and Dreyfus is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Dreyfus New Jersey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus New Jersey and Energy Services 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 Energy Services Fund are associated (or correlated) with Dreyfus New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus New Jersey has no effect on the direction of Energy Services i.e., Energy Services and Dreyfus New go up and down completely randomly.

Pair Corralation between Energy Services and Dreyfus New

Assuming the 90 days horizon Energy Services Fund is expected to under-perform the Dreyfus New. In addition to that, Energy Services is 6.71 times more volatile than Dreyfus New Jersey. It trades about -0.06 of its total potential returns per unit of risk. Dreyfus New Jersey is currently generating about -0.09 per unit of volatility. If you would invest  1,169  in Dreyfus New Jersey on December 30, 2024 and sell it today you would lose (16.00) from holding Dreyfus New Jersey or give up 1.37% of portfolio value over 90 days.

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

Energy Services Fund  vs.  Dreyfus New Jersey

Energy Services

Risk-Adjusted Performance

Very Weak

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

Dreyfus New Jersey

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Energy Services and Dreyfus New

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

The idea behind Energy Services Fund and Dreyfus New Jersey 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..