Correlation Between Coastal Carolina and DWS Municipal

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

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

Diversification Opportunities for Coastal Carolina and DWS Municipal

0.02

Correlation Coefficient

Coastal Carolina  DWS Municipal

Significant diversification

The 3 months correlation between Coastal and DWS is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Coastal Carolina Bancshares 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 Coastal Carolina 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 Coastal Carolina Bancshares 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 Coastal Carolina i.e., Coastal Carolina and DWS Municipal go up and down completely randomly.

Pair Corralation between Coastal Carolina and DWS Municipal

Given the investment horizon of 90 days Coastal Carolina Bancshares is expected to generate 1.11 times more return on investment than DWS Municipal. However, Coastal Carolina is 1.11 times more volatile than DWS Municipal Income. It trades about -0.37 of its potential returns per unit of risk. DWS Municipal Income is currently generating about -0.5 per unit of risk. If you would invest  1,120  in Coastal Carolina Bancshares on October 4, 2024 and sell it today you would lose (45.00) from holding Coastal Carolina Bancshares or give up 4.02% of portfolio value over 90 days.

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

Coastal Carolina Bancshares  vs.  DWS Municipal Income

Coastal Carolina Ban

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coastal Carolina Bancshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Coastal Carolina may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DWS Municipal Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DWS Municipal Income has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Coastal Carolina and DWS Municipal

The main advantage of trading using opposite Coastal Carolina and DWS Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coastal Carolina 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 Coastal Carolina Bancshares 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.