Correlation Between Dreyfus Midcap and Federated Mid-cap
Can any of the company-specific risk be diversified away by investing in both Dreyfus Midcap and Federated Mid-cap 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 Federated Mid-cap 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 Federated Mid Cap Index, you can compare the effects of market volatilities on Dreyfus Midcap and Federated Mid-cap 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 Federated Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Midcap and Federated Mid-cap.
Diversification Opportunities for Dreyfus Midcap and Federated Mid-cap
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dreyfus and Federated is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Midcap Index and Federated Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mid Cap 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 Federated Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mid Cap has no effect on the direction of Dreyfus Midcap i.e., Dreyfus Midcap and Federated Mid-cap go up and down completely randomly.
Pair Corralation between Dreyfus Midcap and Federated Mid-cap
Assuming the 90 days horizon Dreyfus Midcap is expected to generate 1.68 times less return on investment than Federated Mid-cap. In addition to that, Dreyfus Midcap is 1.1 times more volatile than Federated Mid Cap Index. It trades about 0.03 of its total potential returns per unit of risk. Federated Mid Cap Index is currently generating about 0.05 per unit of volatility. If you would invest 1,495 in Federated Mid Cap Index on August 30, 2024 and sell it today you would earn a total of 401.00 from holding Federated Mid Cap Index or generate 26.82% 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. Federated Mid Cap Index
Performance |
| Timeline |
| Dreyfus Midcap Index |
| Federated Mid Cap |
Dreyfus Midcap and Federated Mid-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreyfus Midcap and Federated Mid-cap
The main advantage of trading using opposite Dreyfus Midcap and Federated Mid-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Midcap position performs unexpectedly, Federated Mid-cap 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 Federated Mid-cap will offset losses from the drop in Federated Mid-cap's long position.| Dreyfus Midcap vs. Dreyfus Smallcap Stock | Dreyfus Midcap vs. Bny Mellon Emerging | Dreyfus Midcap vs. Champlain Mid Cap |
| Federated Mid-cap vs. Vanguard Mid Cap Index | Federated Mid-cap vs. Vanguard Mid Cap Index | Federated Mid-cap vs. Vanguard Mid Cap Index | Federated Mid-cap vs. Vanguard Extended Market |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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