Correlation Between Deutsche Short-term and Deutsche Gnma

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

By analyzing existing cross correlation between Deutsche Short Term Municipal and Deutsche Gnma Fund, you can compare the effects of market volatilities on Deutsche Short-term and Deutsche Gnma 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 Deutsche Short-term with a short position of Deutsche Gnma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Short-term and Deutsche Gnma.

Diversification Opportunities for Deutsche Short-term and Deutsche Gnma

0.81

Correlation Coefficient

Deutsche Short-term  Deutsche Gnma

Very poor diversification

The 3 months correlation between Deutsche and Deutsche is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Short Term Municipal and Deutsche Gnma Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Gnma and Deutsche Short-term 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 Deutsche Short Term Municipal are associated (or correlated) with Deutsche Gnma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Gnma has no effect on the direction of Deutsche Short-term i.e., Deutsche Short-term and Deutsche Gnma go up and down completely randomly.

Pair Corralation between Deutsche Short-term and Deutsche Gnma

Assuming the 90 days horizon Deutsche Short-term is expected to generate 5.0 times less return on investment than Deutsche Gnma. But when comparing it to its historical volatility, Deutsche Short Term Municipal is 4.54 times less risky than Deutsche Gnma. It trades about 0.11 of its potential returns per unit of risk. Deutsche Gnma Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,143  in Deutsche Gnma Fund on December 30, 2024 and sell it today you would earn a total of  29.00  from holding Deutsche Gnma Fund or generate 2.54% return on investment over 90 days.

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

Deutsche Short Term Municipal  vs.  Deutsche Gnma Fund

Deutsche Short Term

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Short Term Municipal are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Deutsche Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Deutsche Gnma

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Gnma Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Deutsche Gnma is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deutsche Short-term and Deutsche Gnma

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

The idea behind Deutsche Short Term Municipal and Deutsche Gnma Fund 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.