Correlation Between Deutsche Small and Deutsche Short-term

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

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

Diversification Opportunities for Deutsche Small and Deutsche Short-term

-0.47

Correlation Coefficient

Deutsche Small  Deutsche Short-term

Very good diversification

The 3 months correlation between DEUTSCHE and Deutsche is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Small Cap and Deutsche Short Term Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Short Term and Deutsche Small 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 Small Cap are associated (or correlated) with Deutsche Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Short Term has no effect on the direction of Deutsche Small i.e., Deutsche Small and Deutsche Short-term go up and down completely randomly.

Pair Corralation between Deutsche Small and Deutsche Short-term

Assuming the 90 days horizon Deutsche Small Cap is expected to under-perform the Deutsche Short-term. In addition to that, Deutsche Small is 15.66 times more volatile than Deutsche Short Term Municipal. It trades about -0.12 of its total potential returns per unit of risk. Deutsche Short Term Municipal is currently generating about 0.19 per unit of volatility. If you would invest  978.00  in Deutsche Short Term Municipal on December 24, 2024 and sell it today you would earn a total of  8.00  from holding Deutsche Short Term Municipal or generate 0.82% return on investment over 90 days.

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

Deutsche Small Cap  vs.  Deutsche Short Term Municipal

Deutsche Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deutsche Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Deutsche Short Term

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Short Term Municipal are ranked lower than 15 (%) 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.

Pair Trading with Deutsche Small and Deutsche Short-term

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

The idea behind Deutsche Small Cap and Deutsche Short Term Municipal 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.