Correlation Between Dreyfus Natural and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Dreyfus Natural and Northern Lights 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 Northern Lights 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 Northern Lights, you can compare the effects of market volatilities on Dreyfus Natural and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Natural and Northern Lights.
Diversification Opportunities for Dreyfus Natural and Northern Lights
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dreyfus and Northern is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Natural Resources and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Dreyfus Natural i.e., Dreyfus Natural and Northern Lights go up and down completely randomly.
Pair Corralation between Dreyfus Natural and Northern Lights
Assuming the 90 days horizon Dreyfus Natural Resources is expected to generate 1.25 times more return on investment than Northern Lights. However, Dreyfus Natural is 1.25 times more volatile than Northern Lights. It trades about 0.18 of its potential returns per unit of risk. Northern Lights is currently generating about 0.16 per unit of risk. If you would invest 4,171 in Dreyfus Natural Resources on August 31, 2024 and sell it today you would earn a total of 175.00 from holding Dreyfus Natural Resources or generate 4.2% 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. Northern Lights
Performance |
| Timeline |
| Dreyfus Natural Resources |
| Northern Lights |
Dreyfus Natural and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreyfus Natural and Northern Lights
The main advantage of trading using opposite Dreyfus Natural and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Natural position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Dreyfus Natural vs. Calamos Global Equity | Dreyfus Natural vs. Balanced Fund Retail | Dreyfus Natural vs. Scharf Fund Retail | Dreyfus Natural vs. Cutler Equity |
| Northern Lights vs. Gamco Natural Resources | Northern Lights vs. Tortoise Energy Independence | Northern Lights vs. Franklin Natural Resources | Northern Lights vs. Dreyfus Natural Resources |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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