Correlation Between DWS Municipal and Eaton Vance

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

Diversification Opportunities for DWS Municipal and Eaton Vance

0.54

Correlation Coefficient

DWS Municipal  Eaton Vance

Very weak diversification

The 3 months correlation between DWS and Eaton is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Eaton Vance Tax Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Tax 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Tax has no effect on the direction of DWS Municipal i.e., DWS Municipal and Eaton Vance go up and down completely randomly.

Pair Corralation between DWS Municipal and Eaton Vance

Considering the 90-day investment horizon DWS Municipal Income is expected to generate 0.81 times more return on investment than Eaton Vance. However, DWS Municipal Income is 1.24 times less risky than Eaton Vance. It trades about 0.12 of its potential returns per unit of risk. Eaton Vance Tax Managed is currently generating about 0.09 per unit of risk. If you would invest  961.00  in DWS Municipal Income on September 4, 2024 and sell it today you would earn a total of  43.00  from holding DWS Municipal Income or generate 4.47% return on investment over 90 days.

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

DWS Municipal Income  vs.  Eaton Vance Tax Managed

DWS Municipal Income

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DWS Municipal Income are ranked lower than 9 (%) 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.

Eaton Vance Tax

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Tax Managed are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Eaton Vance is not utilizing all of its potentials. The new stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DWS Municipal and Eaton Vance

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

The idea behind DWS Municipal Income and Eaton Vance Tax Managed 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.