Correlation Between Dreyfus Municipal and T Rowe
Can any of the company-specific risk be diversified away by investing in both Dreyfus Municipal and T Rowe 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 Municipal and T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreyfus Municipal Bond and T Rowe Price, you can compare the effects of market volatilities on Dreyfus Municipal and T Rowe 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 Municipal with a short position of T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Municipal and T Rowe.
Diversification Opportunities for Dreyfus Municipal and T Rowe
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dreyfus and PRINX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Municipal Bond and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price and Dreyfus Municipal 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 Municipal Bond are associated (or correlated) with T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Dreyfus Municipal i.e., Dreyfus Municipal and T Rowe go up and down completely randomly.
Pair Corralation between Dreyfus Municipal and T Rowe
Assuming the 90 days horizon Dreyfus Municipal Bond is expected to under-perform the T Rowe. In addition to that, Dreyfus Municipal is 2.05 times more volatile than T Rowe Price. It trades about -0.26 of its total potential returns per unit of risk. T Rowe Price is currently generating about -0.4 per unit of volatility. If you would invest 1,147 in T Rowe Price on October 11, 2024 and sell it today you would lose (27.00) from holding T Rowe Price or give up 2.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dreyfus Municipal Bond vs. T Rowe Price
Performance |
| Timeline |
| Dreyfus Municipal Bond |
| T Rowe Price |
Dreyfus Municipal and T Rowe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dreyfus Municipal and T Rowe
The main advantage of trading using opposite Dreyfus Municipal and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Municipal position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.| Dreyfus Municipal vs. Fidelity Advisor Financial | Dreyfus Municipal vs. Financial Industries Fund | Dreyfus Municipal vs. Vanguard Financials Index | Dreyfus Municipal vs. Putnam Global Financials |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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