Correlation Between Dreyfus Balanced and Dreyfus Gnma

Can any of the company-specific risk be diversified away by investing in both Dreyfus Balanced and Dreyfus Gnma 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 Gnma 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 Gnma Fund, you can compare the effects of market volatilities on Dreyfus Balanced and Dreyfus Gnma 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 Gnma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Balanced and Dreyfus Gnma.

Diversification Opportunities for Dreyfus Balanced and Dreyfus Gnma

0.28

Correlation Coefficient

Dreyfus Balanced  Dreyfus Gnma

Modest diversification

The 3 months correlation between Dreyfus and Dreyfus is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Balanced Opportunity and Dreyfus Gnma Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Gnma 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 Gnma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Gnma has no effect on the direction of Dreyfus Balanced i.e., Dreyfus Balanced and Dreyfus Gnma go up and down completely randomly.

Pair Corralation between Dreyfus Balanced and Dreyfus Gnma

Assuming the 90 days horizon Dreyfus Balanced Opportunity is expected to under-perform the Dreyfus Gnma. In addition to that, Dreyfus Balanced is 2.99 times more volatile than Dreyfus Gnma Fund. It trades about -0.15 of its total potential returns per unit of risk. Dreyfus Gnma Fund is currently generating about 0.05 per unit of volatility. If you would invest  1,275  in Dreyfus Gnma Fund on December 5, 2024 and sell it today you would earn a total of  11.00  from holding Dreyfus Gnma Fund or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Dreyfus Balanced Opportunity  vs.  Dreyfus Gnma Fund

Dreyfus Balanced Opp

Risk-Adjusted Performance

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

Dreyfus Gnma

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Gnma Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dreyfus Gnma is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dreyfus Balanced and Dreyfus Gnma

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

The idea behind Dreyfus Balanced Opportunity and Dreyfus Gnma 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.