Correlation Between Small Cap and Dreyfus Technology
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Dreyfus Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Growth and Dreyfus Technology Growth, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Dreyfus Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Dreyfus Technology.
Diversification Opportunities for Small Cap and Dreyfus Technology
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small and Dreyfus is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth 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 Small Cap 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 Small Cap Growth 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 Small Cap i.e., Small Cap and Dreyfus Technology go up and down completely randomly.
Pair Corralation between Small Cap and Dreyfus Technology
Assuming the 90 days horizon Small Cap Growth is expected to under-perform the Dreyfus Technology. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Growth is 1.3 times less risky than Dreyfus Technology. The mutual fund trades about -0.24 of its potential returns per unit of risk. The Dreyfus Technology Growth is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 7,758 in Dreyfus Technology Growth on November 28, 2024 and sell it today you would lose (119.00) from holding Dreyfus Technology Growth or give up 1.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Small Cap Growth vs. Dreyfus Technology Growth
Performance |
| Timeline |
| Small Cap Growth |
| Dreyfus Technology Growth |
Small Cap and Dreyfus Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Dreyfus Technology
The main advantage of trading using opposite Small Cap and Dreyfus Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Prudential Financial Services | Small Cap vs. Transamerica Financial Life | Small Cap vs. Gabelli Global Financial | Small Cap vs. Icon Financial Fund |
| Dreyfus Technology vs. Global Diversified Income | Dreyfus Technology vs. Diversified Real Asset | Dreyfus Technology vs. Elfun Diversified Fund | Dreyfus Technology vs. Stone Ridge Diversified |
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 Stocks Directory module to find actively traded stocks across global markets.
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