Correlation Between Chia and Dreyfus Equity

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

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

Diversification Opportunities for Chia and Dreyfus Equity

0.08

Correlation Coefficient

Chia  Dreyfus Equity

Significant diversification

The 3 months correlation between Chia and Dreyfus is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Chia and Dreyfus Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Equity Income and Chia 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 Chia are associated (or correlated) with Dreyfus Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Equity Income has no effect on the direction of Chia i.e., Chia and Dreyfus Equity go up and down completely randomly.

Pair Corralation between Chia and Dreyfus Equity

Assuming the 90 days trading horizon Chia is expected to generate 10.22 times more return on investment than Dreyfus Equity. However, Chia is 10.22 times more volatile than Dreyfus Equity Income. It trades about 0.1 of its potential returns per unit of risk. Dreyfus Equity Income is currently generating about -0.02 per unit of risk. If you would invest  1,407  in Chia on October 23, 2024 and sell it today you would earn a total of  599.00  from holding Chia or generate 42.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Chia  vs.  Dreyfus Equity Income

Chia

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chia are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Chia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dreyfus Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chia and Dreyfus Equity

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

The idea behind Chia and Dreyfus Equity Income 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.