Correlation Between Dreyfus Smallcap and Dreyfus International

Can any of the company-specific risk be diversified away by investing in both Dreyfus Smallcap and Dreyfus International 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 Smallcap and Dreyfus International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dreyfus Smallcap Stock and Dreyfus International Equity, you can compare the effects of market volatilities on Dreyfus Smallcap and Dreyfus International 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 Smallcap with a short position of Dreyfus International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Smallcap and Dreyfus International.

Diversification Opportunities for Dreyfus Smallcap and Dreyfus International

0.69

Correlation Coefficient

Dreyfus Smallcap  Dreyfus International

Poor diversification

The 3 months correlation between Dreyfus and Dreyfus is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Smallcap Stock and Dreyfus International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus International and Dreyfus Smallcap 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 Smallcap Stock are associated (or correlated) with Dreyfus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus International has no effect on the direction of Dreyfus Smallcap i.e., Dreyfus Smallcap and Dreyfus International go up and down completely randomly.

Pair Corralation between Dreyfus Smallcap and Dreyfus International

Assuming the 90 days horizon Dreyfus Smallcap Stock is expected to under-perform the Dreyfus International. In addition to that, Dreyfus Smallcap is 1.62 times more volatile than Dreyfus International Equity. It trades about -0.01 of its total potential returns per unit of risk. Dreyfus International Equity is currently generating about -0.01 per unit of volatility. If you would invest  3,833  in Dreyfus International Equity on February 5, 2024 and sell it today you would lose (9.00) from holding Dreyfus International Equity or give up 0.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Dreyfus Smallcap Stock  vs.  Dreyfus International Equity

Dreyfus Smallcap Stock

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Smallcap Stock are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Dreyfus Smallcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus International Equity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dreyfus International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dreyfus Smallcap and Dreyfus International

The main advantage of trading using opposite Dreyfus Smallcap and Dreyfus International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Smallcap position performs unexpectedly, Dreyfus International 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 International will offset losses from the drop in Dreyfus International's long position.

The idea behind Dreyfus Smallcap Stock and Dreyfus International Equity 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.