Correlation Between Energy Services and Dreyfus Natural
Can any of the company-specific risk be diversified away by investing in both Energy Services 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 Energy Services and Dreyfus Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Services Fund and Dreyfus Natural Resources, you can compare the effects of market volatilities on Energy Services 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 Energy Services with a short position of Dreyfus Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Dreyfus Natural.
Diversification Opportunities for Energy Services and Dreyfus Natural
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Energy and Dreyfus is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund 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 Energy Services 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 Energy Services Fund 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 Energy Services i.e., Energy Services and Dreyfus Natural go up and down completely randomly.
Pair Corralation between Energy Services and Dreyfus Natural
Assuming the 90 days horizon Energy Services Fund is expected to under-perform the Dreyfus Natural. In addition to that, Energy Services is 1.28 times more volatile than Dreyfus Natural Resources. It trades about -0.14 of its total potential returns per unit of risk. Dreyfus Natural Resources is currently generating about -0.14 per unit of volatility. If you would invest 4,038 in Dreyfus Natural Resources on January 13, 2025 and sell it today you would lose (553.00) from holding Dreyfus Natural Resources or give up 13.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Services Fund vs. Dreyfus Natural Resources
Performance |
| Timeline |
| Energy Services |
| Dreyfus Natural Resources |
Energy Services and Dreyfus Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Dreyfus Natural
The main advantage of trading using opposite Energy Services and Dreyfus Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services 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.| Energy Services vs. Energy Fund Investor | Energy Services vs. Basic Materials Fund | Energy Services vs. Electronics Fund Investor | Energy Services vs. Health Care Fund |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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