Correlation Between International Stock and Dreyfus Smallcap
Can any of the company-specific risk be diversified away by investing in both International Stock and Dreyfus Smallcap 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 International Stock and Dreyfus Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Stock Fund and Dreyfus Smallcap Stock, you can compare the effects of market volatilities on International Stock and Dreyfus Smallcap 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 International Stock with a short position of Dreyfus Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Stock and Dreyfus Smallcap.
Diversification Opportunities for International Stock and Dreyfus Smallcap
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between INTERNATIONAL and Dreyfus is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding International Stock Fund and Dreyfus Smallcap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Smallcap Stock and International Stock 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 International Stock Fund are associated (or correlated) with Dreyfus Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Smallcap Stock has no effect on the direction of International Stock i.e., International Stock and Dreyfus Smallcap go up and down completely randomly.
Pair Corralation between International Stock and Dreyfus Smallcap
Assuming the 90 days horizon International Stock Fund is expected to under-perform the Dreyfus Smallcap. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Stock Fund is 1.8 times less risky than Dreyfus Smallcap. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Dreyfus Smallcap Stock is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 2,787 in Dreyfus Smallcap Stock on August 31, 2024 and sell it today you would earn a total of 256.00 from holding Dreyfus Smallcap Stock or generate 9.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Stock Fund vs. Dreyfus Smallcap Stock
Performance |
| Timeline |
| International Stock |
| Dreyfus Smallcap Stock |
International Stock and Dreyfus Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Stock and Dreyfus Smallcap
The main advantage of trading using opposite International Stock and Dreyfus Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Stock position performs unexpectedly, Dreyfus Smallcap 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 Smallcap will offset losses from the drop in Dreyfus Smallcap's long position.The idea behind International Stock Fund and Dreyfus Smallcap Stock 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.| Dreyfus Smallcap vs. Dreyfus Midcap Index | Dreyfus Smallcap vs. Victory Integrity Discovery | Dreyfus Smallcap vs. Vanguard Tax Managed Small Cap | Dreyfus Smallcap vs. Hotchkis Wiley Small |
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 CEOs Directory module to screen CEOs from public companies around the world.
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