Correlation Between Deutsche California and Deutsche Managed

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

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

Diversification Opportunities for Deutsche California and Deutsche Managed

0.94

Correlation Coefficient

Deutsche California  Deutsche Managed

Almost no diversification

The 3 months correlation between Deutsche and DEUTSCHE is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche California Tax Free and Deutsche Managed Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Managed Mun and Deutsche California 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 California Tax Free are associated (or correlated) with Deutsche Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Managed Mun has no effect on the direction of Deutsche California i.e., Deutsche California and Deutsche Managed go up and down completely randomly.

Pair Corralation between Deutsche California and Deutsche Managed

Assuming the 90 days horizon Deutsche California is expected to generate 2.2 times less return on investment than Deutsche Managed. In addition to that, Deutsche California is 1.04 times more volatile than Deutsche Managed Municipal. It trades about 0.04 of its total potential returns per unit of risk. Deutsche Managed Municipal is currently generating about 0.08 per unit of volatility. If you would invest  816.00  in Deutsche Managed Municipal on September 4, 2024 and sell it today you would earn a total of  11.00  from holding Deutsche Managed Municipal or generate 1.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Deutsche California Tax Free  vs.  Deutsche Managed Municipal

Deutsche California Tax

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche California Tax Free are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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.

Deutsche Managed Mun

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Managed Municipal are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Deutsche Managed 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 California and Deutsche Managed

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

The idea behind Deutsche California Tax Free and Deutsche Managed Municipal 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.