Correlation Between DWS Municipal and Logan Ridge

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

Diversification Opportunities for DWS Municipal and Logan Ridge

-0.74

Correlation Coefficient

DWS Municipal  Logan Ridge

Pay attention - limited upside

The 3 months correlation between DWS and Logan is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Logan Ridge Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logan Ridge Finance 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 Logan Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logan Ridge Finance has no effect on the direction of DWS Municipal i.e., DWS Municipal and Logan Ridge go up and down completely randomly.

Pair Corralation between DWS Municipal and Logan Ridge

Considering the 90-day investment horizon DWS Municipal Income is expected to generate 0.39 times more return on investment than Logan Ridge. However, DWS Municipal Income is 2.58 times less risky than Logan Ridge. It trades about 0.39 of its potential returns per unit of risk. Logan Ridge Finance is currently generating about -0.01 per unit of risk. If you would invest  967.00  in DWS Municipal Income on June 9, 2024 and sell it today you would earn a total of  22.00  from holding DWS Municipal Income or generate 2.28% return on investment over 90 days.

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

DWS Municipal Income  vs.  Logan Ridge Finance

DWS Municipal Income

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DWS Municipal Income are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, DWS Municipal may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Logan Ridge Finance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with DWS Municipal and Logan Ridge

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

The idea behind DWS Municipal Income and Logan Ridge Finance 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.