Correlation Between Emerald Insights and Deutsche Munications

Can any of the company-specific risk be diversified away by investing in both Emerald Insights and Deutsche Munications 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 Emerald Insights and Deutsche Munications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emerald Insights Fund and Deutsche Munications Fund, you can compare the effects of market volatilities on Emerald Insights and Deutsche Munications 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 Emerald Insights with a short position of Deutsche Munications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerald Insights and Deutsche Munications.

Diversification Opportunities for Emerald Insights and Deutsche Munications

0.88

Correlation Coefficient

Emerald Insights  Deutsche Munications

Very poor diversification

The 3 months correlation between Emerald and Deutsche is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Emerald Insights Fund and Deutsche Munications Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Munications and Emerald Insights 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 Emerald Insights Fund are associated (or correlated) with Deutsche Munications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Munications has no effect on the direction of Emerald Insights i.e., Emerald Insights and Deutsche Munications go up and down completely randomly.

Pair Corralation between Emerald Insights and Deutsche Munications

Assuming the 90 days horizon Emerald Insights is expected to generate 1.26 times less return on investment than Deutsche Munications. In addition to that, Emerald Insights is 1.24 times more volatile than Deutsche Munications Fund. It trades about 0.11 of its total potential returns per unit of risk. Deutsche Munications Fund is currently generating about 0.17 per unit of volatility. If you would invest  3,641  in Deutsche Munications Fund on September 27, 2024 and sell it today you would earn a total of  372.00  from holding Deutsche Munications Fund or generate 10.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Emerald Insights Fund  vs.  Deutsche Munications Fund

Emerald Insights

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Insights Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Emerald Insights may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deutsche Munications

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Munications Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Deutsche Munications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Emerald Insights and Deutsche Munications

The main advantage of trading using opposite Emerald Insights and Deutsche Munications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerald Insights position performs unexpectedly, Deutsche Munications 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 Deutsche Munications will offset losses from the drop in Deutsche Munications' long position.

The idea behind Emerald Insights Fund and Deutsche Munications Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.