Correlation Between DWS Municipal and Ares Dynamic
Can any of the company-specific risk be diversified away by investing in both DWS Municipal and Ares Dynamic 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 Ares Dynamic 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 Ares Dynamic Credit, you can compare the effects of market volatilities on DWS Municipal and Ares Dynamic 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 Ares Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of DWS Municipal and Ares Dynamic.
Diversification Opportunities for DWS Municipal and Ares Dynamic
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between DWS and Ares is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Ares Dynamic Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Dynamic Credit 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 Ares Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Dynamic Credit has no effect on the direction of DWS Municipal i.e., DWS Municipal and Ares Dynamic go up and down completely randomly.
Pair Corralation between DWS Municipal and Ares Dynamic
Considering the 90-day investment horizon DWS Municipal Income is expected to generate 1.41 times more return on investment than Ares Dynamic. However, DWS Municipal is 1.41 times more volatile than Ares Dynamic Credit. It trades about 0.07 of its potential returns per unit of risk. Ares Dynamic Credit is currently generating about 0.1 per unit of risk. If you would invest 985.00 in DWS Municipal Income on August 31, 2024 and sell it today you would earn a total of 21.00 from holding DWS Municipal Income or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.78% |
| Values | Daily Returns |
DWS Municipal Income vs. Ares Dynamic Credit
Performance |
| Timeline |
| DWS Municipal Income |
| Ares Dynamic Credit |
DWS Municipal and Ares Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DWS Municipal and Ares Dynamic
The main advantage of trading using opposite DWS Municipal and Ares Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DWS Municipal position performs unexpectedly, Ares Dynamic 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 Ares Dynamic will offset losses from the drop in Ares Dynamic's long position.| DWS Municipal vs. DTF Tax Free | DWS Municipal vs. Blackrock Muniyield Quality | DWS Municipal vs. Blackrock Muni Intermediate | DWS Municipal vs. Blackrock Muniholdings Quality |
| Ares Dynamic vs. Eaton Vance Floating | Ares Dynamic vs. NXG NextGen Infrastructure | Ares Dynamic vs. GAMCO Natural Resources | Ares Dynamic vs. MFS Investment Grade |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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