Correlation Between DWS and IShares SP

Can any of the company-specific risk be diversified away by investing in both DWS and IShares SP 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 and IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DWS and iShares SP Small Cap, you can compare the effects of market volatilities on DWS and IShares SP 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 with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of DWS and IShares SP.

Diversification Opportunities for DWS and IShares SP

0.42

Correlation Coefficient

DWS  IShares SP

Very weak diversification

The 3 months correlation between DWS and IShares is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding DWS and iShares SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Small and DWS 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 are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Small has no effect on the direction of DWS i.e., DWS and IShares SP go up and down completely randomly.

Pair Corralation between DWS and IShares SP

Given the investment horizon of 90 days DWS is expected to generate 0.79 times more return on investment than IShares SP. However, DWS is 1.27 times less risky than IShares SP. It trades about 0.15 of its potential returns per unit of risk. iShares SP Small Cap is currently generating about 0.04 per unit of risk. If you would invest  2,383  in DWS on October 3, 2024 and sell it today you would earn a total of  104.00  from holding DWS or generate 4.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	7.4%
Values	Daily Returns

DWS  vs.  iShares SP Small Cap

DWS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DWS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, DWS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares SP Small

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Small Cap are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, IShares SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DWS and IShares SP

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

The idea behind DWS and iShares SP Small Cap 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.