Correlation Between Dreyfus Natural and Aqr Small
Can any of the company-specific risk be diversified away by investing in both Dreyfus Natural and Aqr Small 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 Natural and Aqr Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreyfus Natural Resources and Aqr Small Cap, you can compare the effects of market volatilities on Dreyfus Natural and Aqr Small 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 Natural with a short position of Aqr Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Natural and Aqr Small.
Diversification Opportunities for Dreyfus Natural and Aqr Small
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dreyfus and Aqr is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Natural Resources and Aqr Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Small Cap and Dreyfus Natural 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 Natural Resources are associated (or correlated) with Aqr Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Small Cap has no effect on the direction of Dreyfus Natural i.e., Dreyfus Natural and Aqr Small go up and down completely randomly.
Pair Corralation between Dreyfus Natural and Aqr Small
Assuming the 90 days horizon Dreyfus Natural is expected to generate 1.98 times less return on investment than Aqr Small. But when comparing it to its historical volatility, Dreyfus Natural Resources is 1.2 times less risky than Aqr Small. It trades about 0.06 of its potential returns per unit of risk. Aqr Small Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,848 in Aqr Small Cap on September 3, 2024 and sell it today you would earn a total of 662.00 from holding Aqr Small Cap or generate 35.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dreyfus Natural Resources vs. Aqr Small Cap
Performance |
| Timeline |
| Dreyfus Natural Resources |
| Aqr Small Cap |
Dreyfus Natural and Aqr Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreyfus Natural and Aqr Small
The main advantage of trading using opposite Dreyfus Natural and Aqr Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Natural position performs unexpectedly, Aqr Small 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 Aqr Small will offset losses from the drop in Aqr Small's long position.| Dreyfus Natural vs. Hsbc Treasury Money | Dreyfus Natural vs. Elfun Government Money | Dreyfus Natural vs. Schwab Treasury Money | Dreyfus Natural vs. Prudential Government Money |
| Aqr Small vs. Ab High Income | Aqr Small vs. Goldman Sachs High | Aqr Small vs. Lgm Risk Managed | Aqr Small vs. Guggenheim High Yield |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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