Correlation Between Dreyfus Active and Vanguard Mid-cap
Can any of the company-specific risk be diversified away by investing in both Dreyfus Active and Vanguard Mid-cap 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 Active and Vanguard Mid-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dreyfus Active Midcap and Vanguard Mid Cap Index, you can compare the effects of market volatilities on Dreyfus Active and Vanguard Mid-cap 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 Active with a short position of Vanguard Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Active and Vanguard Mid-cap.
Diversification Opportunities for Dreyfus Active and Vanguard Mid-cap
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dreyfus and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Active Midcap and Vanguard Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and Dreyfus Active 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 Active Midcap are associated (or correlated) with Vanguard Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Dreyfus Active i.e., Dreyfus Active and Vanguard Mid-cap go up and down completely randomly.
Pair Corralation between Dreyfus Active and Vanguard Mid-cap
Assuming the 90 days horizon Dreyfus Active Midcap is expected to under-perform the Vanguard Mid-cap. In addition to that, Dreyfus Active is 1.16 times more volatile than Vanguard Mid Cap Index. It trades about -0.21 of its total potential returns per unit of risk. Vanguard Mid Cap Index is currently generating about -0.18 per unit of volatility. If you would invest 32,823 in Vanguard Mid Cap Index on January 19, 2024 and sell it today you would lose (1,073) from holding Vanguard Mid Cap Index or give up 3.27% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Dreyfus Active Midcap vs. Vanguard Mid Cap Index
Performance |
Timeline |
Dreyfus Active Midcap |
Vanguard Mid Cap |
Dreyfus Active and Vanguard Mid-cap Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dreyfus Active and Vanguard Mid-cap
The main advantage of trading using opposite Dreyfus Active and Vanguard Mid-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Active position performs unexpectedly, Vanguard Mid-cap 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 Vanguard Mid-cap will offset losses from the drop in Vanguard Mid-cap's long position.Dreyfus Active vs. Deutsche Real Estate | Dreyfus Active vs. Pender Real Estate | Dreyfus Active vs. Davis Real Estate | Dreyfus Active vs. Dreyfus Global Real |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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