Correlation Between Dreyfus Balanced and Dreyfus Appreciation

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

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

Diversification Opportunities for Dreyfus Balanced and Dreyfus Appreciation

0.84

Correlation Coefficient

Dreyfus Balanced  Dreyfus Appreciation

Very poor diversification

The 3 months correlation between Dreyfus and Dreyfus is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Balanced Opportunity and Dreyfus Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Appreciation and Dreyfus Balanced 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 Dreyfus Balanced Opportunity are associated (or correlated) with Dreyfus Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Appreciation has no effect on the direction of Dreyfus Balanced i.e., Dreyfus Balanced and Dreyfus Appreciation go up and down completely randomly.

Pair Corralation between Dreyfus Balanced and Dreyfus Appreciation

Assuming the 90 days horizon Dreyfus Balanced Opportunity is expected to generate 0.53 times more return on investment than Dreyfus Appreciation. However, Dreyfus Balanced Opportunity is 1.89 times less risky than Dreyfus Appreciation. It trades about -0.25 of its potential returns per unit of risk. Dreyfus Appreciation Fund is currently generating about -0.23 per unit of risk. If you would invest  2,555  in Dreyfus Balanced Opportunity on September 25, 2024 and sell it today you would lose (191.00) from holding Dreyfus Balanced Opportunity or give up 7.48% of portfolio value over 90 days.

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

Dreyfus Balanced Opportunity  vs.  Dreyfus Appreciation Fund

Dreyfus Balanced Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfus Balanced Opportunity has generated negative risk-adjusted returns adding no value to fund investors. 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.

Dreyfus Appreciation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfus Appreciation Fund 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.

Pair Trading with Dreyfus Balanced and Dreyfus Appreciation

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

The idea behind Dreyfus Balanced Opportunity and Dreyfus Appreciation Fund 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.