Correlation Between Dreyfus Short-term and Dreyfus Gnma
Can any of the company-specific risk be diversified away by investing in both Dreyfus Short-term and Dreyfus Gnma 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 Short-term and Dreyfus Gnma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreyfus Short Term Income and Dreyfus Gnma Fund, you can compare the effects of market volatilities on Dreyfus Short-term and Dreyfus Gnma 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 Short-term with a short position of Dreyfus Gnma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Short-term and Dreyfus Gnma.
Diversification Opportunities for Dreyfus Short-term and Dreyfus Gnma
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dreyfus and Dreyfus is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Short Term Income and Dreyfus Gnma Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Gnma and Dreyfus Short-term 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 Short Term Income are associated (or correlated) with Dreyfus Gnma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Gnma has no effect on the direction of Dreyfus Short-term i.e., Dreyfus Short-term and Dreyfus Gnma go up and down completely randomly.
Pair Corralation between Dreyfus Short-term and Dreyfus Gnma
Assuming the 90 days horizon Dreyfus Short-term is expected to generate 5.35 times less return on investment than Dreyfus Gnma. But when comparing it to its historical volatility, Dreyfus Short Term Income is 2.85 times less risky than Dreyfus Gnma. It trades about 0.08 of its potential returns per unit of risk. Dreyfus Gnma Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,271 in Dreyfus Gnma Fund on September 1, 2024 and sell it today you would earn a total of 14.00 from holding Dreyfus Gnma Fund or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dreyfus Short Term Income vs. Dreyfus Gnma Fund
Performance |
| Timeline |
| Dreyfus Short Term |
| Dreyfus Gnma |
Dreyfus Short-term and Dreyfus Gnma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreyfus Short-term and Dreyfus Gnma
The main advantage of trading using opposite Dreyfus Short-term and Dreyfus Gnma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Short-term position performs unexpectedly, Dreyfus Gnma 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 Gnma will offset losses from the drop in Dreyfus Gnma's long position.The idea behind Dreyfus Short Term Income and Dreyfus Gnma Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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