Correlation Between GM and Dreyfus Natural
Can any of the company-specific risk be diversified away by investing in both GM and Dreyfus Natural 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 GM and Dreyfus Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Dreyfus Natural Resources, you can compare the effects of market volatilities on GM and Dreyfus Natural 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 GM with a short position of Dreyfus Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Dreyfus Natural.
Diversification Opportunities for GM and Dreyfus Natural
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Dreyfus is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Dreyfus Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Natural Resources and GM 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 General Motors are associated (or correlated) with Dreyfus Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Natural Resources has no effect on the direction of GM i.e., GM and Dreyfus Natural go up and down completely randomly.
Pair Corralation between GM and Dreyfus Natural
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.49 times more return on investment than Dreyfus Natural. However, GM is 1.49 times more volatile than Dreyfus Natural Resources. It trades about 0.07 of its potential returns per unit of risk. Dreyfus Natural Resources is currently generating about 0.01 per unit of risk. If you would invest 3,536 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,023 from holding General Motors or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Dreyfus Natural Resources
Performance |
| Timeline |
| General Motors |
| Dreyfus Natural Resources |
GM and Dreyfus Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Dreyfus Natural
The main advantage of trading using opposite GM and Dreyfus Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Dreyfus Natural 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 Natural will offset losses from the drop in Dreyfus Natural's long position.The idea behind General Motors and Dreyfus Natural Resources 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.| Dreyfus Natural vs. Calamos Global Equity | Dreyfus Natural vs. Balanced Fund Retail | Dreyfus Natural vs. Scharf Fund Retail | Dreyfus Natural vs. Cutler Equity |
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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