Correlation Between Dreyfus Intermediate and Dreyfus Municipal
Can any of the company-specific risk be diversified away by investing in both Dreyfus Intermediate and Dreyfus Municipal 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 Dreyfus Intermediate and Dreyfus Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreyfus Intermediate Municipal and Dreyfus Municipal Bond, you can compare the effects of market volatilities on Dreyfus Intermediate and Dreyfus Municipal 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 Dreyfus Intermediate with a short position of Dreyfus Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Intermediate and Dreyfus Municipal.
Diversification Opportunities for Dreyfus Intermediate and Dreyfus Municipal
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dreyfus and Dreyfus is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Intermediate Municipal and Dreyfus Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Municipal Bond and Dreyfus Intermediate 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 Dreyfus Intermediate Municipal are associated (or correlated) with Dreyfus Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Municipal Bond has no effect on the direction of Dreyfus Intermediate i.e., Dreyfus Intermediate and Dreyfus Municipal go up and down completely randomly.
Pair Corralation between Dreyfus Intermediate and Dreyfus Municipal
Assuming the 90 days horizon Dreyfus Intermediate is expected to generate 1.25 times less return on investment than Dreyfus Municipal. But when comparing it to its historical volatility, Dreyfus Intermediate Municipal is 1.32 times less risky than Dreyfus Municipal. It trades about 0.15 of its potential returns per unit of risk. Dreyfus Municipal Bond is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,213 in Dreyfus Municipal Bond on August 25, 2024 and sell it today you would earn a total of 12.00 from holding Dreyfus Municipal Bond or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dreyfus Intermediate Municipal vs. Dreyfus Municipal Bond
Performance |
| Timeline |
| Dreyfus Intermediate |
| Dreyfus Municipal Bond |
Dreyfus Intermediate and Dreyfus Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreyfus Intermediate and Dreyfus Municipal
The main advantage of trading using opposite Dreyfus Intermediate and Dreyfus Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Intermediate position performs unexpectedly, Dreyfus Municipal 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 Municipal will offset losses from the drop in Dreyfus Municipal's long position.The idea behind Dreyfus Intermediate Municipal and Dreyfus Municipal 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.
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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