Correlation Between Ab Small and Dreyfus/newton International

Can any of the company-specific risk be diversified away by investing in both Ab Small and Dreyfus/newton International 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/newton International 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 Dreyfusnewton International Equity, you can compare the effects of market volatilities on Ab Small and Dreyfus/newton International 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/newton International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Small and Dreyfus/newton International.

Diversification Opportunities for Ab Small and Dreyfus/newton International

-0.32

Correlation Coefficient

Ab Small  Dreyfus/newton International

Very good diversification

The 3 months correlation between SCYVX and Dreyfus/newton is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Dreyfusnewton International Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus/newton International 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/newton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus/newton International has no effect on the direction of Ab Small i.e., Ab Small and Dreyfus/newton International go up and down completely randomly.

Pair Corralation between Ab Small and Dreyfus/newton International

Assuming the 90 days horizon Ab Small Cap is expected to under-perform the Dreyfus/newton International. In addition to that, Ab Small is 1.17 times more volatile than Dreyfusnewton International Equity. It trades about -0.14 of its total potential returns per unit of risk. Dreyfusnewton International Equity is currently generating about 0.23 per unit of volatility. If you would invest  1,423  in Dreyfusnewton International Equity on December 24, 2024 and sell it today you would earn a total of  191.00  from holding Dreyfusnewton International Equity or generate 13.42% return on investment over 90 days.

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

Ab Small Cap  vs.  Dreyfusnewton International Eq

Ab Small Cap

Risk-Adjusted Performance

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Dreyfus/newton International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfusnewton International Equity are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus/newton International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ab Small and Dreyfus/newton International

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

The idea behind Ab Small Cap and Dreyfusnewton International Equity 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.