Correlation Between Dreyfus Midcap and Dreyfus Smallcap
Can any of the company-specific risk be diversified away by investing in both Dreyfus Midcap and Dreyfus Smallcap 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 Midcap and Dreyfus Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreyfus Midcap Index and Dreyfus Smallcap Stock, you can compare the effects of market volatilities on Dreyfus Midcap and Dreyfus Smallcap 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 Midcap with a short position of Dreyfus Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Midcap and Dreyfus Smallcap.
Diversification Opportunities for Dreyfus Midcap and Dreyfus Smallcap
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 Midcap Index and Dreyfus Smallcap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Smallcap Stock and Dreyfus Midcap 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 Midcap Index are associated (or correlated) with Dreyfus Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Smallcap Stock has no effect on the direction of Dreyfus Midcap i.e., Dreyfus Midcap and Dreyfus Smallcap go up and down completely randomly.
Pair Corralation between Dreyfus Midcap and Dreyfus Smallcap
Assuming the 90 days horizon Dreyfus Midcap is expected to generate 1.14 times less return on investment than Dreyfus Smallcap. But when comparing it to its historical volatility, Dreyfus Midcap Index is 1.38 times less risky than Dreyfus Smallcap. It trades about 0.27 of its potential returns per unit of risk. Dreyfus Smallcap Stock is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,799 in Dreyfus Smallcap Stock on August 29, 2024 and sell it today you would earn a total of 240.00 from holding Dreyfus Smallcap Stock or generate 8.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dreyfus Midcap Index vs. Dreyfus Smallcap Stock
Performance |
| Timeline |
| Dreyfus Midcap Index |
| Dreyfus Smallcap Stock |
Dreyfus Midcap and Dreyfus Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreyfus Midcap and Dreyfus Smallcap
The main advantage of trading using opposite Dreyfus Midcap and Dreyfus Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Midcap position performs unexpectedly, Dreyfus Smallcap 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 Smallcap will offset losses from the drop in Dreyfus Smallcap's long position.| Dreyfus Midcap vs. Dreyfus Smallcap Stock | Dreyfus Midcap vs. Bny Mellon Emerging | Dreyfus Midcap vs. Champlain Mid Cap |
| Dreyfus Smallcap vs. Dreyfus Midcap Index | Dreyfus Smallcap vs. Victory Integrity Discovery | Dreyfus Smallcap vs. Vanguard Tax Managed Small Cap | Dreyfus Smallcap vs. Hotchkis Wiley Small |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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