Correlation Between DWS Municipal and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both DWS Municipal and Diamond Hill 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 Diamond Hill 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 Diamond Hill Investment, you can compare the effects of market volatilities on DWS Municipal and Diamond Hill 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 Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of DWS Municipal and Diamond Hill.
Diversification Opportunities for DWS Municipal and Diamond Hill
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DWS and Diamond is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Diamond Hill Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Investment 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 Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Investment has no effect on the direction of DWS Municipal i.e., DWS Municipal and Diamond Hill go up and down completely randomly.
Pair Corralation between DWS Municipal and Diamond Hill
Considering the 90-day investment horizon DWS Municipal Income is expected to generate 0.36 times more return on investment than Diamond Hill. However, DWS Municipal Income is 2.81 times less risky than Diamond Hill. It trades about 0.05 of its potential returns per unit of risk. Diamond Hill Investment is currently generating about -0.02 per unit of risk. If you would invest 942.00 in DWS Municipal Income on October 24, 2024 and sell it today you would earn a total of 4.00 from holding DWS Municipal Income or generate 0.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DWS Municipal Income vs. Diamond Hill Investment
Performance |
| Timeline |
| DWS Municipal Income |
| Diamond Hill Investment |
DWS Municipal and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DWS Municipal and Diamond Hill
The main advantage of trading using opposite DWS Municipal and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DWS Municipal position performs unexpectedly, Diamond Hill 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 Diamond Hill will offset losses from the drop in Diamond Hill'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 |
| Diamond Hill vs. Federated Premier Municipal | Diamond Hill vs. Blackrock Muniyield | Diamond Hill vs. NXG NextGen Infrastructure | Diamond Hill vs. Federated Investors B |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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