Correlation Between NXG NextGen and DWS Municipal
Can any of the company-specific risk be diversified away by investing in both NXG NextGen and DWS Municipal 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 NXG NextGen and DWS Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NXG NextGen Infrastructure and DWS Municipal Income, you can compare the effects of market volatilities on NXG NextGen and DWS Municipal 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 NXG NextGen with a short position of DWS Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXG NextGen and DWS Municipal.
Diversification Opportunities for NXG NextGen and DWS Municipal
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NXG and DWS is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NXG NextGen Infrastructure and DWS Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DWS Municipal Income and NXG NextGen 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 NXG NextGen Infrastructure are associated (or correlated) with DWS Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DWS Municipal Income has no effect on the direction of NXG NextGen i.e., NXG NextGen and DWS Municipal go up and down completely randomly.
Pair Corralation between NXG NextGen and DWS Municipal
Considering the 90-day investment horizon NXG NextGen Infrastructure is expected to generate 1.91 times more return on investment than DWS Municipal. However, NXG NextGen is 1.91 times more volatile than DWS Municipal Income. It trades about 0.39 of its potential returns per unit of risk. DWS Municipal Income is currently generating about 0.11 per unit of risk. If you would invest 3,899 in NXG NextGen Infrastructure on August 31, 2024 and sell it today you would earn a total of 1,241 from holding NXG NextGen Infrastructure or generate 31.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NXG NextGen Infrastructure vs. DWS Municipal Income
Performance |
| Timeline |
| NXG NextGen Infrastr |
| DWS Municipal Income |
NXG NextGen and DWS Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NXG NextGen and DWS Municipal
The main advantage of trading using opposite NXG NextGen and DWS Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXG NextGen position performs unexpectedly, DWS Municipal 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 DWS Municipal will offset losses from the drop in DWS Municipal's long position.| NXG NextGen vs. MFS Investment Grade | NXG NextGen vs. Invesco High Income | NXG NextGen vs. Eaton Vance National | NXG NextGen vs. Nuveen California Select |
| DWS Municipal vs. DTF Tax Free | DWS Municipal vs. Blackrock Muniyield Quality | DWS Municipal vs. Blackrock Muni Intermediate | DWS Municipal vs. Blackrock Muniholdings Quality |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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