Correlation Between William Blair and Dreyfus Technology

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

By analyzing existing cross correlation between William Blair Small and Dreyfus Technology Growth, you can compare the effects of market volatilities on William Blair and Dreyfus Technology 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 William Blair with a short position of Dreyfus Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of William Blair and Dreyfus Technology.

Diversification Opportunities for William Blair and Dreyfus Technology

0.77

Correlation Coefficient

William Blair  Dreyfus Technology

Poor diversification

The 3 months correlation between William and Dreyfus is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding William Blair Small and Dreyfus Technology Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Technology Growth and William Blair 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 William Blair Small are associated (or correlated) with Dreyfus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Technology Growth has no effect on the direction of William Blair i.e., William Blair and Dreyfus Technology go up and down completely randomly.

Pair Corralation between William Blair and Dreyfus Technology

Assuming the 90 days horizon William Blair Small is expected to under-perform the Dreyfus Technology. In addition to that, William Blair is 1.24 times more volatile than Dreyfus Technology Growth. It trades about -0.04 of its total potential returns per unit of risk. Dreyfus Technology Growth is currently generating about 0.06 per unit of volatility. If you would invest  7,716  in Dreyfus Technology Growth on September 27, 2024 and sell it today you would earn a total of  222.00  from holding Dreyfus Technology Growth or generate 2.88% return on investment over 90 days.

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

William Blair Small  vs.  Dreyfus Technology Growth

William Blair Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days William Blair Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, William Blair is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Technology Growth

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Technology Growth are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dreyfus Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with William Blair and Dreyfus Technology

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

The idea behind William Blair Small and Dreyfus Technology Growth 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.