Correlation Between Sterling Capital and Dreyfus Balanced

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

By analyzing existing cross correlation between Sterling Capital Stratton and Dreyfus Balanced Opportunity, you can compare the effects of market volatilities on Sterling Capital and Dreyfus Balanced 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 Sterling Capital with a short position of Dreyfus Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and Dreyfus Balanced.

Diversification Opportunities for Sterling Capital and Dreyfus Balanced

0.71

Correlation Coefficient

Sterling Capital  Dreyfus Balanced

Poor diversification

The 3 months correlation between Sterling and Dreyfus is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Stratton and Dreyfus Balanced Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Balanced Opp and Sterling Capital 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 Sterling Capital Stratton are associated (or correlated) with Dreyfus Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Balanced Opp has no effect on the direction of Sterling Capital i.e., Sterling Capital and Dreyfus Balanced go up and down completely randomly.

Pair Corralation between Sterling Capital and Dreyfus Balanced

Assuming the 90 days horizon Sterling Capital Stratton is expected to under-perform the Dreyfus Balanced. In addition to that, Sterling Capital is 3.69 times more volatile than Dreyfus Balanced Opportunity. It trades about -0.07 of its total potential returns per unit of risk. Dreyfus Balanced Opportunity is currently generating about 0.13 per unit of volatility. If you would invest  2,457  in Dreyfus Balanced Opportunity on September 15, 2024 and sell it today you would earn a total of  90.00  from holding Dreyfus Balanced Opportunity or generate 3.66% return on investment over 90 days.

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

Sterling Capital Stratton  vs.  Dreyfus Balanced Opportunity

Sterling Capital Stratton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Capital Stratton has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Dreyfus Balanced Opp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Balanced Opportunity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Dreyfus Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sterling Capital and Dreyfus Balanced

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

The idea behind Sterling Capital Stratton and Dreyfus Balanced Opportunity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.