Correlation Between DWS Municipal and Ellsworth Convertible
Can any of the company-specific risk be diversified away by investing in both DWS Municipal and Ellsworth Convertible 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 Ellsworth Convertible 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 Ellsworth Convertible Growth, you can compare the effects of market volatilities on DWS Municipal and Ellsworth Convertible 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 Ellsworth Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of DWS Municipal and Ellsworth Convertible.
Diversification Opportunities for DWS Municipal and Ellsworth Convertible
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between DWS and Ellsworth is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Ellsworth Convertible Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellsworth Convertible 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 Ellsworth Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellsworth Convertible has no effect on the direction of DWS Municipal i.e., DWS Municipal and Ellsworth Convertible go up and down completely randomly.
Pair Corralation between DWS Municipal and Ellsworth Convertible
Considering the 90-day investment horizon DWS Municipal Income is expected to generate 0.5 times more return on investment than Ellsworth Convertible. However, DWS Municipal Income is 1.99 times less risky than Ellsworth Convertible. It trades about 0.45 of its potential returns per unit of risk. Ellsworth Convertible Growth is currently generating about -0.06 per unit of risk. If you would invest 940.00 in DWS Municipal Income on November 26, 2024 and sell it today you would earn a total of 28.00 from holding DWS Municipal Income or generate 2.98% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
DWS Municipal Income vs. Ellsworth Convertible Growth
Performance |
Timeline |
DWS Municipal Income |
Ellsworth Convertible |
DWS Municipal and Ellsworth Convertible Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with DWS Municipal and Ellsworth Convertible
The main advantage of trading using opposite DWS Municipal and Ellsworth Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DWS Municipal position performs unexpectedly, Ellsworth Convertible 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 Ellsworth Convertible will offset losses from the drop in Ellsworth Convertible's long position.DWS Municipal vs. DTF Tax Free | ||
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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