Correlation Between Dreyfus Institutional and Franklin
Can any of the company-specific risk be diversified away by investing in both Dreyfus Institutional and Franklin 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 Institutional and Franklin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreyfus Institutional Reserves and Franklin Government Money, you can compare the effects of market volatilities on Dreyfus Institutional and Franklin 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 Institutional with a short position of Franklin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Institutional and Franklin.
Diversification Opportunities for Dreyfus Institutional and Franklin
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dreyfus and Franklin is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Institutional Reserves and Franklin Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Government Money and Dreyfus Institutional 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 Institutional Reserves are associated (or correlated) with Franklin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Government Money has no effect on the direction of Dreyfus Institutional i.e., Dreyfus Institutional and Franklin go up and down completely randomly.
Pair Corralation between Dreyfus Institutional and Franklin
Assuming the 90 days horizon Dreyfus Institutional Reserves is expected to generate 2.03 times more return on investment than Franklin. However, Dreyfus Institutional is 2.03 times more volatile than Franklin Government Money. It trades about 0.07 of its potential returns per unit of risk. Franklin Government Money is currently generating about 0.14 per unit of risk. If you would invest 95.00 in Dreyfus Institutional Reserves on August 25, 2024 and sell it today you would earn a total of 5.00 from holding Dreyfus Institutional Reserves or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.9% |
| Values | Daily Returns |
Dreyfus Institutional Reserves vs. Franklin Government Money
Performance |
| Timeline |
| Dreyfus Institutional |
| Franklin Government Money |
Dreyfus Institutional and Franklin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreyfus Institutional and Franklin
The main advantage of trading using opposite Dreyfus Institutional and Franklin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Institutional position performs unexpectedly, Franklin 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 Franklin will offset losses from the drop in Franklin's long position.| Dreyfus Institutional vs. Vanguard Total Stock | Dreyfus Institutional vs. Vanguard 500 Index | Dreyfus Institutional vs. Vanguard Total Stock | Dreyfus Institutional vs. Vanguard Total Stock |
| Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard 500 Index | Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard Total Stock |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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