Correlation Between Vanguard Mid and Dreyfus Opportunistic

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

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

Diversification Opportunities for Vanguard Mid and Dreyfus Opportunistic

0.99

Correlation Coefficient

Vanguard Mid  Dreyfus Opportunistic

No risk reduction

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

Pair Corralation between Vanguard Mid and Dreyfus Opportunistic

Assuming the 90 days horizon Vanguard Mid Cap Index is expected to generate 0.98 times more return on investment than Dreyfus Opportunistic. However, Vanguard Mid Cap Index is 1.02 times less risky than Dreyfus Opportunistic. It trades about 0.06 of its potential returns per unit of risk. Dreyfus Opportunistic Midcap is currently generating about -0.01 per unit of risk. If you would invest  37,592  in Vanguard Mid Cap Index on September 12, 2024 and sell it today you would earn a total of  248.00  from holding Vanguard Mid Cap Index or generate 0.66% return on investment over 90 days.

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

Vanguard Mid Cap Index  vs.  Dreyfus Opportunistic Midcap

Vanguard Mid Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dreyfus Opportunistic

Risk-Adjusted Performance

15 of 100

Solid

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

Pair Trading with Vanguard Mid and Dreyfus Opportunistic

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

The idea behind Vanguard Mid Cap Index and Dreyfus Opportunistic Midcap 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 Global Correlations module to find global opportunities by holding instruments from different markets.