Correlation Between Short Term and Deutsche Munications

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

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

Diversification Opportunities for Short Term and Deutsche Munications

-0.67

Correlation Coefficient

Short Term  Deutsche Munications

Excellent diversification

The 3 months correlation between Short and Deutsche is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Deutsche Munications Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Munications and 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 Short Term Government Fund are associated (or correlated) with Deutsche Munications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Munications has no effect on the direction of Short Term i.e., Short Term and Deutsche Munications go up and down completely randomly.

Pair Corralation between Short Term and Deutsche Munications

Assuming the 90 days horizon Short Term Government Fund is expected to under-perform the Deutsche Munications. But the mutual fund apears to be less risky and, when comparing its historical volatility, Short Term Government Fund is 8.03 times less risky than Deutsche Munications. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Deutsche Munications Fund is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  3,395  in Deutsche Munications Fund on September 15, 2024 and sell it today you would earn a total of  620.00  from holding Deutsche Munications Fund or generate 18.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Short Term Government Fund  vs.  Deutsche Munications Fund

Short Term Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Term Government Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Short Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Deutsche Munications

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Munications Fund are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Deutsche Munications showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Short Term and Deutsche Munications

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

The idea behind Short Term Government Fund and Deutsche Munications 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.