Correlation Between DWS Municipal and Nuveen California
Can any of the company-specific risk be diversified away by investing in both DWS Municipal and Nuveen California 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 Nuveen California 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 Nuveen California Select, you can compare the effects of market volatilities on DWS Municipal and Nuveen California 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 Nuveen California. Check out your portfolio center. Please also check ongoing floating volatility patterns of DWS Municipal and Nuveen California.
Diversification Opportunities for DWS Municipal and Nuveen California
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between DWS and Nuveen is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Nuveen California Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen California Select 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 Nuveen California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen California Select has no effect on the direction of DWS Municipal i.e., DWS Municipal and Nuveen California go up and down completely randomly.
Pair Corralation between DWS Municipal and Nuveen California
Considering the 90-day investment horizon DWS Municipal Income is expected to generate 0.68 times more return on investment than Nuveen California. However, DWS Municipal Income is 1.47 times less risky than Nuveen California. It trades about 0.07 of its potential returns per unit of risk. Nuveen California Select is currently generating about 0.02 per unit of risk. If you would invest 797.00 in DWS Municipal Income on August 27, 2024 and sell it today you would earn a total of 189.00 from holding DWS Municipal Income or generate 23.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DWS Municipal Income vs. Nuveen California Select
Performance |
| Timeline |
| DWS Municipal Income |
| Nuveen California Select |
DWS Municipal and Nuveen California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DWS Municipal and Nuveen California
The main advantage of trading using opposite DWS Municipal and Nuveen California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DWS Municipal position performs unexpectedly, Nuveen California 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 Nuveen California will offset losses from the drop in Nuveen California'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 |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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