Correlation Between Deutsche Munications and Emerald Insights

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

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

Diversification Opportunities for Deutsche Munications and Emerald Insights

0.88

Correlation Coefficient

Deutsche Munications  Emerald Insights

Very poor diversification

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

Pair Corralation between Deutsche Munications and Emerald Insights

Assuming the 90 days horizon Deutsche Munications Fund is expected to generate 0.81 times more return on investment than Emerald Insights. However, Deutsche Munications Fund is 1.24 times less risky than Emerald Insights. It trades about 0.17 of its potential returns per unit of risk. Emerald Insights Fund is currently generating about 0.11 per unit of risk. 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

Deutsche Munications Fund  vs.  Emerald Insights Fund

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.

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.

Pair Trading with Deutsche Munications and Emerald Insights

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

The idea behind Deutsche Munications Fund and Emerald Insights 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.