Correlation Between Deutsche Gnma and Deutsche California

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

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

Diversification Opportunities for Deutsche Gnma and Deutsche California

0.74

Correlation Coefficient

Deutsche Gnma  Deutsche California

Poor diversification

The 3 months correlation between Deutsche and Deutsche is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Gnma Fund and Deutsche California Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche California Tax and Deutsche Gnma 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 Gnma Fund are associated (or correlated) with Deutsche California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche California Tax has no effect on the direction of Deutsche Gnma i.e., Deutsche Gnma and Deutsche California go up and down completely randomly.

Pair Corralation between Deutsche Gnma and Deutsche California

Assuming the 90 days horizon Deutsche Gnma Fund is expected to under-perform the Deutsche California. In addition to that, Deutsche Gnma is 1.22 times more volatile than Deutsche California Tax Free. It trades about -0.13 of its total potential returns per unit of risk. Deutsche California Tax Free is currently generating about 0.01 per unit of volatility. If you would invest  670.00  in Deutsche California Tax Free on September 12, 2024 and sell it today you would earn a total of  1.00  from holding Deutsche California Tax Free or generate 0.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Deutsche Gnma Fund  vs.  Deutsche California Tax Free

Deutsche Gnma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Gnma Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Deutsche Gnma is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Deutsche California Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche California Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Deutsche California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deutsche Gnma and Deutsche California

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

The idea behind Deutsche Gnma Fund and Deutsche California Tax Free 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.