Correlation Between Small Cap and Dreyfus Strategic
Can any of the company-specific risk be diversified away by investing in both Small Cap and Dreyfus Strategic 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 Small Cap and Dreyfus Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value and Dreyfus Strategic Municipal, you can compare the effects of market volatilities on Small Cap and Dreyfus Strategic 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 Small Cap with a short position of Dreyfus Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Dreyfus Strategic.
Diversification Opportunities for Small Cap and Dreyfus Strategic
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Dreyfus is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Dreyfus Strategic Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Strategic and Small Cap 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 Small Cap Value are associated (or correlated) with Dreyfus Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Strategic has no effect on the direction of Small Cap i.e., Small Cap and Dreyfus Strategic go up and down completely randomly.
Pair Corralation between Small Cap and Dreyfus Strategic
Assuming the 90 days horizon Small Cap Value is expected to generate 2.75 times more return on investment than Dreyfus Strategic. However, Small Cap is 2.75 times more volatile than Dreyfus Strategic Municipal. It trades about 0.23 of its potential returns per unit of risk. Dreyfus Strategic Municipal is currently generating about 0.16 per unit of risk. If you would invest 1,806 in Small Cap Value on September 1, 2024 and sell it today you would earn a total of 153.00 from holding Small Cap Value or generate 8.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Dreyfus Strategic Municipal
Performance |
| Timeline |
| Small Cap Value |
| Dreyfus Strategic |
Small Cap and Dreyfus Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Dreyfus Strategic
The main advantage of trading using opposite Small Cap and Dreyfus Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Dreyfus Strategic 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 Strategic will offset losses from the drop in Dreyfus Strategic's long position.| Small Cap vs. Artisan Thematic Fund | Small Cap vs. T Rowe Price | Small Cap vs. Semiconductor Ultrasector Profund | Small Cap vs. Volumetric Fund Volumetric |
| Dreyfus Strategic vs. Vanguard Total Stock | Dreyfus Strategic vs. Vanguard 500 Index | Dreyfus Strategic vs. Vanguard Total Stock | Dreyfus Strategic 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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