Correlation Between Dreyfus Midcap and Federated Mid

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

By analyzing existing cross correlation between Dreyfus Midcap Index and Federated Mid Cap Index, you can compare the effects of market volatilities on Dreyfus Midcap and Federated Mid 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 Midcap with a short position of Federated Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Midcap and Federated Mid.

Diversification Opportunities for Dreyfus Midcap and Federated Mid

1.0

Correlation Coefficient

Dreyfus Midcap  Federated Mid

No risk reduction

The 3 months correlation between Dreyfus and Federated is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Midcap Index and Federated Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mid Cap and Dreyfus Midcap 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 Midcap Index are associated (or correlated) with Federated Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mid Cap has no effect on the direction of Dreyfus Midcap i.e., Dreyfus Midcap and Federated Mid go up and down completely randomly.

Pair Corralation between Dreyfus Midcap and Federated Mid

Assuming the 90 days horizon Dreyfus Midcap is expected to generate 1.01 times less return on investment than Federated Mid. In addition to that, Dreyfus Midcap is 1.0 times more volatile than Federated Mid Cap Index. It trades about 0.34 of its total potential returns per unit of risk. Federated Mid Cap Index is currently generating about 0.34 per unit of volatility. If you would invest  1,348  in Federated Mid Cap Index on February 10, 2025 and sell it today you would earn a total of  114.00  from holding Federated Mid Cap Index or generate 8.46% return on investment over 90 days.

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

Dreyfus Midcap Index  vs.  Federated Mid Cap Index

Dreyfus Midcap Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dreyfus Midcap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Federated Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Mid Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Dreyfus Midcap and Federated Mid

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

The idea behind Dreyfus Midcap Index and Federated Mid Cap Index 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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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.