Correlation Between DWS Municipal and Oxford Lane

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

Diversification Opportunities for DWS Municipal and Oxford Lane

0.5

Correlation Coefficient

DWS Municipal  Oxford Lane

Very weak diversification

The 3 months correlation between DWS and Oxford is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Oxford Lane Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxford Lane 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 Oxford Lane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxford Lane Capital has no effect on the direction of DWS Municipal i.e., DWS Municipal and Oxford Lane go up and down completely randomly.

Pair Corralation between DWS Municipal and Oxford Lane

Considering the 90-day investment horizon DWS Municipal Income is expected to under-perform the Oxford Lane. In addition to that, DWS Municipal is 1.96 times more volatile than Oxford Lane Capital. It trades about -0.02 of its total potential returns per unit of risk. Oxford Lane Capital is currently generating about 0.17 per unit of volatility. If you would invest  2,237  in Oxford Lane Capital on December 19, 2024 and sell it today you would earn a total of  59.00  from holding Oxford Lane Capital or generate 2.64% 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.  Oxford Lane Capital

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.

Oxford Lane Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oxford Lane Capital are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Oxford Lane is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with DWS Municipal and Oxford Lane

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

The idea behind DWS Municipal Income and Oxford Lane Capital 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.