Correlation Between DWS Municipal and Investcorp Credit

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

Diversification Opportunities for DWS Municipal and Investcorp Credit

0.26

Correlation Coefficient

DWS Municipal  Investcorp Credit

Modest diversification

The 3 months correlation between DWS and Investcorp is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Investcorp Credit Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investcorp Credit 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 Investcorp Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investcorp Credit has no effect on the direction of DWS Municipal i.e., DWS Municipal and Investcorp Credit go up and down completely randomly.

Pair Corralation between DWS Municipal and Investcorp Credit

Considering the 90-day investment horizon DWS Municipal is expected to generate 1.47 times less return on investment than Investcorp Credit. But when comparing it to its historical volatility, DWS Municipal Income is 2.41 times less risky than Investcorp Credit. It trades about 0.37 of its potential returns per unit of risk. Investcorp Credit Management is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  311.00  in Investcorp Credit Management on December 5, 2024 and sell it today you would earn a total of  11.00  from holding Investcorp Credit Management or generate 3.54% return on investment over 90 days.

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

DWS Municipal Income  vs.  Investcorp Credit Management

DWS Municipal Income

Risk-Adjusted Performance

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.

Investcorp Credit

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Investcorp Credit Management are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Investcorp Credit may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DWS Municipal and Investcorp Credit

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

The idea behind DWS Municipal Income and Investcorp Credit Management 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.