Correlation Between DWS Municipal and Greenville Federal

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

Diversification Opportunities for DWS Municipal and Greenville Federal

0.01

Correlation Coefficient

DWS Municipal  Greenville Federal

Significant diversification

The 3 months correlation between DWS and Greenville is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Greenville Federal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenville Federal 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 Greenville Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenville Federal has no effect on the direction of DWS Municipal i.e., DWS Municipal and Greenville Federal go up and down completely randomly.

Pair Corralation between DWS Municipal and Greenville Federal

Considering the 90-day investment horizon DWS Municipal Income is expected to under-perform the Greenville Federal. But the stock apears to be less risky and, when comparing its historical volatility, DWS Municipal Income is 3.92 times less risky than Greenville Federal. The stock trades about -0.5 of its potential returns per unit of risk. The Greenville Federal Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  700.00  in Greenville Federal Financial on October 4, 2024 and sell it today you would earn a total of  15.00  from holding Greenville Federal Financial or generate 2.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

DWS Municipal Income  vs.  Greenville Federal Financial

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.

Greenville Federal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greenville Federal Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Greenville Federal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DWS Municipal and Greenville Federal

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

The idea behind DWS Municipal Income and Greenville Federal Financial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.