Correlation Between DWS Municipal and PennantPark Investment
Can any of the company-specific risk be diversified away by investing in both DWS Municipal and PennantPark Investment 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 PennantPark Investment 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 PennantPark Investment, you can compare the effects of market volatilities on DWS Municipal and PennantPark Investment 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 PennantPark Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of DWS Municipal and PennantPark Investment.
Diversification Opportunities for DWS Municipal and PennantPark Investment
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DWS and PennantPark is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark 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 PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of DWS Municipal i.e., DWS Municipal and PennantPark Investment go up and down completely randomly.
Pair Corralation between DWS Municipal and PennantPark Investment
Considering the 90-day investment horizon DWS Municipal Income is expected to generate 0.58 times more return on investment than PennantPark Investment. However, DWS Municipal Income is 1.71 times less risky than PennantPark Investment. It trades about 0.12 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.06 per unit of risk. If you would invest 847.00 in DWS Municipal Income on August 27, 2024 and sell it today you would earn a total of 139.00 from holding DWS Municipal Income or generate 16.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DWS Municipal Income vs. PennantPark Investment
Performance |
| Timeline |
| DWS Municipal Income |
| PennantPark Investment |
DWS Municipal and PennantPark Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DWS Municipal and PennantPark Investment
The main advantage of trading using opposite DWS Municipal and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DWS Municipal position performs unexpectedly, PennantPark Investment 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 PennantPark Investment will offset losses from the drop in PennantPark Investment'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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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