Correlation Between Dreyfus Active and Caterpillar
Can any of the company-specific risk be diversified away by investing in both Dreyfus Active and Caterpillar 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 Caterpillar 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 Caterpillar, you can compare the effects of market volatilities on Dreyfus Active and Caterpillar 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 Caterpillar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dreyfus Active and Caterpillar.
Diversification Opportunities for Dreyfus Active and Caterpillar
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dreyfus and Caterpillar is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Active Midcap and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar 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 Caterpillar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caterpillar has no effect on the direction of Dreyfus Active i.e., Dreyfus Active and Caterpillar go up and down completely randomly.
Pair Corralation between Dreyfus Active and Caterpillar
Assuming the 90 days horizon Dreyfus Active Midcap is expected to under-perform the Caterpillar. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dreyfus Active Midcap is 1.35 times less risky than Caterpillar. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Caterpillar is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 35,466 in Caterpillar on January 25, 2024 and sell it today you would earn a total of 905.00 from holding Caterpillar or generate 2.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Dreyfus Active Midcap vs. Caterpillar
Performance |
Timeline |
Dreyfus Active Midcap |
Caterpillar |
Dreyfus Active and Caterpillar Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dreyfus Active and Caterpillar
The main advantage of trading using opposite Dreyfus Active and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dreyfus Active position performs unexpectedly, Caterpillar 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 Caterpillar will offset losses from the drop in Caterpillar's long position.Dreyfus Active vs. Dreyfusthe Boston Pany | Dreyfus Active vs. Dreyfus International Bond | Dreyfus Active vs. Dreyfus International Bond | Dreyfus Active vs. Dreyfus Large Cap |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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