Correlation Between MFS Investment and DWS Municipal
Can any of the company-specific risk be diversified away by investing in both MFS Investment and DWS Municipal 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 MFS Investment and DWS Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFS Investment Grade and DWS Municipal Income, you can compare the effects of market volatilities on MFS Investment and DWS Municipal 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 MFS Investment with a short position of DWS Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Investment and DWS Municipal.
Diversification Opportunities for MFS Investment and DWS Municipal
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MFS and DWS is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and DWS Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DWS Municipal Income and MFS Investment 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 MFS Investment Grade are associated (or correlated) with DWS Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DWS Municipal Income has no effect on the direction of MFS Investment i.e., MFS Investment and DWS Municipal go up and down completely randomly.
Pair Corralation between MFS Investment and DWS Municipal
Considering the 90-day investment horizon MFS Investment is expected to generate 1.38 times less return on investment than DWS Municipal. But when comparing it to its historical volatility, MFS Investment Grade is 1.38 times less risky than DWS Municipal. It trades about 0.15 of its potential returns per unit of risk. DWS Municipal Income is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 785.00 in DWS Municipal Income on August 24, 2024 and sell it today you would earn a total of 205.00 from holding DWS Municipal Income or generate 26.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MFS Investment Grade vs. DWS Municipal Income
Performance |
| Timeline |
| MFS Investment Grade |
| DWS Municipal Income |
MFS Investment and DWS Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFS Investment and DWS Municipal
The main advantage of trading using opposite MFS Investment and DWS Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFS Investment position performs unexpectedly, DWS Municipal 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 DWS Municipal will offset losses from the drop in DWS Municipal's long position.| MFS Investment vs. Invesco High Income | MFS Investment vs. Eaton Vance National | MFS Investment vs. Nuveen California Select | MFS Investment vs. Federated Premier Municipal |
| DWS Municipal vs. Pioneer Floating Rate | DWS Municipal vs. The Gabelli Equity | DWS Municipal vs. Pioneer Municipal High | DWS Municipal vs. Nuveen Global High |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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