Correlation Between Blackrock Bond and Dreyfus Smallcap

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

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

Diversification Opportunities for Blackrock Bond and Dreyfus Smallcap

0.69

Correlation Coefficient

Blackrock Bond  Dreyfus Smallcap

Poor diversification

The 3 months correlation between Blackrock and Dreyfus is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Bond Index and Dreyfus Smallcap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Smallcap Stock and Blackrock Bond 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 Blackrock Bond Index are associated (or correlated) with Dreyfus Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Smallcap Stock has no effect on the direction of Blackrock Bond i.e., Blackrock Bond and Dreyfus Smallcap go up and down completely randomly.

Pair Corralation between Blackrock Bond and Dreyfus Smallcap

Assuming the 90 days horizon Blackrock Bond is expected to generate 4.59 times less return on investment than Dreyfus Smallcap. But when comparing it to its historical volatility, Blackrock Bond Index is 3.2 times less risky than Dreyfus Smallcap. It trades about 0.3 of its potential returns per unit of risk. Dreyfus Smallcap Stock is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  2,450  in Dreyfus Smallcap Stock on February 17, 2024 and sell it today you would earn a total of  198.00  from holding Dreyfus Smallcap Stock or generate 8.08% return on investment over 90 days.

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

Blackrock Bond Index  vs.  Dreyfus Smallcap Stock

Blackrock Bond Index

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Bond Index are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Blackrock Bond is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Dreyfus Smallcap Stock

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Smallcap Stock are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Dreyfus Smallcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blackrock Bond and Dreyfus Smallcap

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

The idea behind Blackrock Bond Index and Dreyfus Smallcap Stock 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.