Correlation Between Vanguard Institutional and The Dreyfus

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

By analyzing existing cross correlation between Vanguard Institutional Index and The Dreyfus Sustainable, you can compare the effects of market volatilities on Vanguard Institutional and The Dreyfus 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 Vanguard Institutional with a short position of The Dreyfus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Institutional and The Dreyfus.

Diversification Opportunities for Vanguard Institutional and The Dreyfus

0.99

Correlation Coefficient

Vanguard Institutional  The Dreyfus

No risk reduction

The 3 months correlation between Vanguard and The is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Institutional Index and The Dreyfus Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Dreyfus Sustainable and Vanguard Institutional 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 Vanguard Institutional Index are associated (or correlated) with The Dreyfus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Dreyfus Sustainable has no effect on the direction of Vanguard Institutional i.e., Vanguard Institutional and The Dreyfus go up and down completely randomly.

Pair Corralation between Vanguard Institutional and The Dreyfus

Assuming the 90 days horizon Vanguard Institutional is expected to generate 1.02 times less return on investment than The Dreyfus. But when comparing it to its historical volatility, Vanguard Institutional Index is 1.12 times less risky than The Dreyfus. It trades about 0.2 of its potential returns per unit of risk. The Dreyfus Sustainable is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,466  in The Dreyfus Sustainable on September 2, 2024 and sell it today you would earn a total of  141.00  from holding The Dreyfus Sustainable or generate 9.62% return on investment over 90 days.

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

Vanguard Institutional Index  vs.  The Dreyfus Sustainable

Vanguard Institutional

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Institutional Index are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Institutional may actually be approaching a critical reversion point that can send shares even higher in January 2025.

The Dreyfus Sustainable

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Dreyfus Sustainable are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, The Dreyfus may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Institutional and The Dreyfus

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

The idea behind Vanguard Institutional Index and The Dreyfus Sustainable 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.