Correlation Between Vanguard Lifestrategy and Dreyfus Natural
Can any of the company-specific risk be diversified away by investing in both Vanguard Lifestrategy 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 Vanguard Lifestrategy and Dreyfus Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Lifestrategy Moderate and Dreyfus Natural Resources, you can compare the effects of market volatilities on Vanguard Lifestrategy 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 Vanguard Lifestrategy with a short position of Dreyfus Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Lifestrategy and Dreyfus Natural.
Diversification Opportunities for Vanguard Lifestrategy and Dreyfus Natural
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Dreyfus is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Lifestrategy Moderate 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 Vanguard Lifestrategy 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 Vanguard Lifestrategy Moderate 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 Vanguard Lifestrategy i.e., Vanguard Lifestrategy and Dreyfus Natural go up and down completely randomly.
Pair Corralation between Vanguard Lifestrategy and Dreyfus Natural
Assuming the 90 days horizon Vanguard Lifestrategy Moderate is expected to generate 0.55 times more return on investment than Dreyfus Natural. However, Vanguard Lifestrategy Moderate is 1.82 times less risky than Dreyfus Natural. It trades about 0.15 of its potential returns per unit of risk. Dreyfus Natural Resources is currently generating about 0.05 per unit of risk. If you would invest 3,148 in Vanguard Lifestrategy Moderate on November 4, 2024 and sell it today you would earn a total of 51.00 from holding Vanguard Lifestrategy Moderate or generate 1.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Lifestrategy Moderate vs. Dreyfus Natural Resources
Performance |
| Timeline |
| Vanguard Lifestrategy |
| Dreyfus Natural Resources |
Vanguard Lifestrategy and Dreyfus Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Lifestrategy and Dreyfus Natural
The main advantage of trading using opposite Vanguard Lifestrategy and Dreyfus Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Lifestrategy 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 Vanguard Lifestrategy Moderate 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.
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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