Correlation Between Visa and Dreyfus Tax

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

By analyzing existing cross correlation between Visa Class A and Dreyfus Tax Managed, you can compare the effects of market volatilities on Visa and Dreyfus Tax 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 Visa with a short position of Dreyfus Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Dreyfus Tax.

Diversification Opportunities for Visa and Dreyfus Tax

-0.38

Correlation Coefficient

Visa  Dreyfus Tax

Very good diversification

The 3 months correlation between Visa and Dreyfus is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Dreyfus Tax Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Tax Managed and Visa 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 Visa Class A are associated (or correlated) with Dreyfus Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Tax Managed has no effect on the direction of Visa i.e., Visa and Dreyfus Tax go up and down completely randomly.

Pair Corralation between Visa and Dreyfus Tax

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.51 times more return on investment than Dreyfus Tax. However, Visa Class A is 1.96 times less risky than Dreyfus Tax. It trades about 0.26 of its potential returns per unit of risk. Dreyfus Tax Managed is currently generating about -0.13 per unit of risk. If you would invest  28,365  in Visa Class A on September 26, 2024 and sell it today you would earn a total of  3,700  from holding Visa Class A or generate 13.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Visa Class A  vs.  Dreyfus Tax Managed

Visa Class A

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Dreyfus Tax Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfus Tax Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Visa and Dreyfus Tax

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

The idea behind Visa Class A and Dreyfus Tax Managed 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.