Correlation Between DWS Municipal and Associated Capital

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

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

Diversification Opportunities for DWS Municipal and Associated Capital

0.62

Correlation Coefficient

DWS Municipal  Associated Capital

Poor diversification

The 3 months correlation between DWS and Associated is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Associated Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Capital and DWS Municipal 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 DWS Municipal Income are associated (or correlated) with Associated Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Capital has no effect on the direction of DWS Municipal i.e., DWS Municipal and Associated Capital go up and down completely randomly.

Pair Corralation between DWS Municipal and Associated Capital

Considering the 90-day investment horizon DWS Municipal is expected to generate 10.09 times less return on investment than Associated Capital. But when comparing it to its historical volatility, DWS Municipal Income is 3.61 times less risky than Associated Capital. It trades about 0.03 of its potential returns per unit of risk. Associated Capital Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,536  in Associated Capital Group on December 28, 2024 and sell it today you would earn a total of  273.00  from holding Associated Capital Group or generate 7.72% return on investment over 90 days.

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

DWS Municipal Income  vs.  Associated Capital Group

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.

Associated Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Capital Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Associated Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DWS Municipal and Associated Capital

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

The idea behind DWS Municipal Income and Associated Capital Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.