Correlation Between Dreyfus New and Dreyfus Municipal
Can any of the company-specific risk be diversified away by investing in both Dreyfus New and Dreyfus Municipal 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 New and Dreyfus Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreyfus New York and Dreyfus Municipal Bond, you can compare the effects of market volatilities on Dreyfus New and Dreyfus Municipal 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 New with a short position of Dreyfus Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus New and Dreyfus Municipal.
Diversification Opportunities for Dreyfus New and Dreyfus Municipal
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dreyfus and Dreyfus is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus New York and Dreyfus Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Municipal Bond and Dreyfus New 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 New York are associated (or correlated) with Dreyfus Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Municipal Bond has no effect on the direction of Dreyfus New i.e., Dreyfus New and Dreyfus Municipal go up and down completely randomly.
Pair Corralation between Dreyfus New and Dreyfus Municipal
Assuming the 90 days horizon Dreyfus New is expected to generate 1.12 times less return on investment than Dreyfus Municipal. But when comparing it to its historical volatility, Dreyfus New York is 1.05 times less risky than Dreyfus Municipal. It trades about 0.13 of its potential returns per unit of risk. Dreyfus Municipal Bond is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,218 in Dreyfus Municipal Bond on August 28, 2024 and sell it today you would earn a total of 12.00 from holding Dreyfus Municipal Bond or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dreyfus New York vs. Dreyfus Municipal Bond
Performance |
| Timeline |
| Dreyfus New York |
| Dreyfus Municipal Bond |
Dreyfus New and Dreyfus Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreyfus New and Dreyfus Municipal
The main advantage of trading using opposite Dreyfus New and Dreyfus Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus New position performs unexpectedly, Dreyfus Municipal 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 Municipal will offset losses from the drop in Dreyfus Municipal's long position.| Dreyfus New vs. Extended Market Index | Dreyfus New vs. Ep Emerging Markets | Dreyfus New vs. Pace International Emerging | Dreyfus New vs. Western Asset Diversified |
| Dreyfus Municipal vs. Dreyfusstandish Global Fixed | Dreyfus Municipal vs. Dreyfusstandish Global Fixed | Dreyfus Municipal vs. Dreyfus High Yield | Dreyfus Municipal vs. Dreyfus High Yield |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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