Correlation Between Dreyfus Natural and Madison Moderate

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

By analyzing existing cross correlation between Dreyfus Natural Resources and Madison Moderate Allocation, you can compare the effects of market volatilities on Dreyfus Natural and Madison Moderate 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 Natural with a short position of Madison Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Natural and Madison Moderate.

Diversification Opportunities for Dreyfus Natural and Madison Moderate

0.17

Correlation Coefficient

Dreyfus Natural  Madison Moderate

Average diversification

The 3 months correlation between Dreyfus and Madison is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Natural Resources and Madison Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Moderate All and Dreyfus Natural 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 Natural Resources are associated (or correlated) with Madison Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Moderate All has no effect on the direction of Dreyfus Natural i.e., Dreyfus Natural and Madison Moderate go up and down completely randomly.

Pair Corralation between Dreyfus Natural and Madison Moderate

Assuming the 90 days horizon Dreyfus Natural Resources is expected to under-perform the Madison Moderate. In addition to that, Dreyfus Natural is 3.41 times more volatile than Madison Moderate Allocation. It trades about -0.11 of its total potential returns per unit of risk. Madison Moderate Allocation is currently generating about 0.13 per unit of volatility. If you would invest  1,071  in Madison Moderate Allocation on March 7, 2024 and sell it today you would earn a total of  10.00  from holding Madison Moderate Allocation or generate 0.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Dreyfus Natural Resources  vs.  Madison Moderate Allocation

Dreyfus Natural Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Natural Resources are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus Natural may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Madison Moderate All

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Moderate Allocation are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Madison Moderate 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 Natural and Madison Moderate

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

The idea behind Dreyfus Natural Resources and Madison Moderate Allocation 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.