Correlation Between DWS Municipal and Allianzgi Diversified

Can any of the company-specific risk be diversified away by investing in both DWS Municipal and Allianzgi Diversified 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 Allianzgi Diversified 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 Allianzgi Diversified Income, you can compare the effects of market volatilities on DWS Municipal and Allianzgi Diversified 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 Allianzgi Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of DWS Municipal and Allianzgi Diversified.

Diversification Opportunities for DWS Municipal and Allianzgi Diversified

0.19

Correlation Coefficient

DWS Municipal  Allianzgi Diversified

Average diversification

The 3 months correlation between DWS and Allianzgi is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Allianzgi Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianzgi Diversified 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 Allianzgi Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianzgi Diversified has no effect on the direction of DWS Municipal i.e., DWS Municipal and Allianzgi Diversified go up and down completely randomly.

Pair Corralation between DWS Municipal and Allianzgi Diversified

Considering the 90-day investment horizon DWS Municipal is expected to generate 1.37 times less return on investment than Allianzgi Diversified. But when comparing it to its historical volatility, DWS Municipal Income is 1.66 times less risky than Allianzgi Diversified. It trades about 0.07 of its potential returns per unit of risk. Allianzgi Diversified Income is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,749  in Allianzgi Diversified Income on October 4, 2024 and sell it today you would earn a total of  446.00  from holding Allianzgi Diversified Income or generate 25.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.73%
Values	Daily Returns

DWS Municipal Income  vs.  Allianzgi Diversified Income

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.

Allianzgi Diversified

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allianzgi Diversified Income are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly stable fundamental indicators, Allianzgi Diversified is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with DWS Municipal and Allianzgi Diversified

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

The idea behind DWS Municipal Income and Allianzgi Diversified 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.