Correlation Between Honest and Dreyfus Active

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Can any of the company-specific risk be diversified away by investing in both Honest and Dreyfus Active 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 Honest and Dreyfus Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honest Company and Dreyfus Active Midcap, you can compare the effects of market volatilities on Honest and Dreyfus Active 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 Honest with a short position of Dreyfus Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honest and Dreyfus Active.

Diversification Opportunities for Honest and Dreyfus Active

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Honest and Dreyfus is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company and DREYFUS ACTIVE MIDCAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Active Midcap and Honest 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 Honest Company are associated (or correlated) with Dreyfus Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Active Midcap has no effect on the direction of Honest i.e., Honest and Dreyfus Active go up and down completely randomly.

Pair Corralation between Honest and Dreyfus Active

Given the investment horizon of 90 days Honest Company is expected to generate 13.15 times more return on investment than Dreyfus Active. However, Honest is 13.15 times more volatile than Dreyfus Active Midcap. It trades about 0.08 of its potential returns per unit of risk. Dreyfus Active Midcap is currently generating about 0.29 per unit of risk. If you would invest  355.00  in Honest Company on December 29, 2023 and sell it today you would earn a total of  28.00  from holding Honest Company or generate 7.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

Honest Company  vs.  DREYFUS ACTIVE MIDCAP

 Performance 
       Timeline  
Honest Company 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Honest Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Honest unveiled solid returns over the last few months and may actually be approaching a breakup point.
Dreyfus Active Midcap 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Active Midcap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly fragile basic indicators, Dreyfus Active may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Honest and Dreyfus Active Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Honest and Dreyfus Active

The main advantage of trading using opposite Honest and Dreyfus Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honest position performs unexpectedly, Dreyfus Active 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 Active will offset losses from the drop in Dreyfus Active's long position.
The idea behind Honest Company and Dreyfus Active Midcap 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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