Correlation Between International Stock and Dreyfus International
Can any of the company-specific risk be diversified away by investing in both International Stock and Dreyfus International 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 International 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 International Bond, you can compare the effects of market volatilities on International Stock and Dreyfus International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Stock and Dreyfus International.
Diversification Opportunities for International Stock and Dreyfus International
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and Dreyfus is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding International Stock Fund and Dreyfus International Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus International has no effect on the direction of International Stock i.e., International Stock and Dreyfus International go up and down completely randomly.
Pair Corralation between International Stock and Dreyfus International
Assuming the 90 days horizon International Stock Fund is expected to generate 2.05 times more return on investment than Dreyfus International. However, International Stock is 2.05 times more volatile than Dreyfus International Bond. It trades about -0.03 of its potential returns per unit of risk. Dreyfus International Bond is currently generating about -0.07 per unit of risk. If you would invest 2,445 in International Stock Fund on November 2, 2024 and sell it today you would lose (46.00) from holding International Stock Fund or give up 1.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Stock Fund vs. Dreyfus International Bond
Performance |
| Timeline |
| International Stock |
| Dreyfus International |
International Stock and Dreyfus International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Stock and Dreyfus International
The main advantage of trading using opposite International Stock and Dreyfus International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Stock position performs unexpectedly, Dreyfus International 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 International will offset losses from the drop in Dreyfus International's long position.The idea behind International Stock Fund and Dreyfus International Bond 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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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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