Correlation Between Dreyfus Natural and Extended Market
Can any of the company-specific risk be diversified away by investing in both Dreyfus Natural and Extended Market 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 Extended Market 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 Extended Market Index, you can compare the effects of market volatilities on Dreyfus Natural and Extended Market 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 Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Natural and Extended Market.
Diversification Opportunities for Dreyfus Natural and Extended Market
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dreyfus and Extended is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Natural Resources and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index 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 Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Dreyfus Natural i.e., Dreyfus Natural and Extended Market go up and down completely randomly.
Pair Corralation between Dreyfus Natural and Extended Market
Assuming the 90 days horizon Dreyfus Natural Resources is expected to under-perform the Extended Market. In addition to that, Dreyfus Natural is 2.25 times more volatile than Extended Market Index. It trades about -0.22 of its total potential returns per unit of risk. Extended Market Index is currently generating about -0.05 per unit of volatility. If you would invest 2,490 in Extended Market Index on September 12, 2024 and sell it today you would lose (24.00) from holding Extended Market Index or give up 0.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dreyfus Natural Resources vs. Extended Market Index
Performance |
| Timeline |
| Dreyfus Natural Resources |
| Extended Market Index |
Dreyfus Natural and Extended Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreyfus Natural and Extended Market
The main advantage of trading using opposite Dreyfus Natural and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Natural position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market's long position.| Dreyfus Natural vs. Hsbc Government Money | Dreyfus Natural vs. Us Government Securities | Dreyfus Natural vs. Virtus Seix Government | Dreyfus Natural vs. Payden Government Fund |
| Extended Market vs. Vanguard Mid Cap Index | Extended Market vs. Vanguard Mid Cap Index | Extended Market vs. Vanguard Mid Cap Index | Extended Market vs. Vanguard Mid Cap Index |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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