Correlation Between Elysee Development and DWS Municipal

Can any of the company-specific risk be diversified away by investing in both Elysee Development and DWS Municipal 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 Elysee Development and DWS Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elysee Development Corp and DWS Municipal Income, you can compare the effects of market volatilities on Elysee Development and DWS Municipal 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 Elysee Development with a short position of DWS Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elysee Development and DWS Municipal.

Diversification Opportunities for Elysee Development and DWS Municipal

0.23

Correlation Coefficient

Elysee Development  DWS Municipal

Modest diversification

The 3 months correlation between Elysee and DWS is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Elysee Development Corp and DWS Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DWS Municipal Income and Elysee Development 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 Elysee Development Corp are associated (or correlated) with DWS Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DWS Municipal Income has no effect on the direction of Elysee Development i.e., Elysee Development and DWS Municipal go up and down completely randomly.

Pair Corralation between Elysee Development and DWS Municipal

Assuming the 90 days horizon Elysee Development Corp is expected to generate 7.88 times more return on investment than DWS Municipal. However, Elysee Development is 7.88 times more volatile than DWS Municipal Income. It trades about 0.08 of its potential returns per unit of risk. DWS Municipal Income is currently generating about 0.03 per unit of risk. If you would invest  21.00  in Elysee Development Corp on December 28, 2024 and sell it today you would earn a total of  3.00  from holding Elysee Development Corp or generate 14.29% return on investment over 90 days.

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

Elysee Development Corp  vs.  DWS Municipal Income

Elysee Development Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elysee Development Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Elysee Development reported solid returns over the last few months and may actually be approaching a breakup point.

DWS Municipal Income

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DWS Municipal Income are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DWS Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Elysee Development and DWS Municipal

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

The idea behind Elysee Development Corp and DWS Municipal Income 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.