Correlation Between DWS Municipal and PUYI Old

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

Diversification Opportunities for DWS Municipal and PUYI Old

-0.75

Correlation Coefficient

DWS Municipal  PUYI Old

Pay attention - limited upside

The 3 months correlation between DWS and PUYI is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and PUYI Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PUYI Old 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 PUYI Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PUYI Old has no effect on the direction of DWS Municipal i.e., DWS Municipal and PUYI Old go up and down completely randomly.

Pair Corralation between DWS Municipal and PUYI Old

Considering the 90-day investment horizon DWS Municipal is expected to generate 4.92 times less return on investment than PUYI Old. But when comparing it to its historical volatility, DWS Municipal Income is 8.46 times less risky than PUYI Old. It trades about 0.04 of its potential returns per unit of risk. PUYI Old is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  626.00  in PUYI Old on October 24, 2024 and sell it today you would lose (6.00) from holding PUYI Old or give up 0.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	24.09%
Values	Daily Returns

DWS Municipal Income  vs.  PUYI Old

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.

PUYI Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PUYI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, PUYI Old is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with DWS Municipal and PUYI Old

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

The idea behind DWS Municipal Income and PUYI Old 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.