Correlation Between Walker Dunlop and DWS Municipal

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

By analyzing existing cross correlation between Walker Dunlop and DWS Municipal Income, you can compare the effects of market volatilities on Walker Dunlop 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 Walker Dunlop with a short position of DWS Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walker Dunlop and DWS Municipal.

Diversification Opportunities for Walker Dunlop and DWS Municipal

0.71

Correlation Coefficient

Walker Dunlop  DWS Municipal

Poor diversification

The 3 months correlation between Walker and DWS is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop 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 Walker Dunlop 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 Walker Dunlop 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 Walker Dunlop i.e., Walker Dunlop and DWS Municipal go up and down completely randomly.

Pair Corralation between Walker Dunlop and DWS Municipal

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 2.75 times more return on investment than DWS Municipal. However, Walker Dunlop is 2.75 times more volatile than DWS Municipal Income. It trades about 0.12 of its potential returns per unit of risk. DWS Municipal Income is currently generating about 0.04 per unit of risk. If you would invest  10,269  in Walker Dunlop on August 12, 2024 and sell it today you would earn a total of  924.00  from holding Walker Dunlop or generate 9.0% return on investment over 90 days.

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

Walker Dunlop  vs.  DWS Municipal Income

Walker Dunlop

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walker Dunlop are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Walker Dunlop exhibited solid returns over the last few months and may actually be approaching a breakup point.

DWS Municipal Income

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DWS Municipal Income are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DWS Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walker Dunlop and DWS Municipal

The main advantage of trading using opposite Walker Dunlop and DWS Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walker Dunlop 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.

The idea behind Walker Dunlop and DWS Municipal Income 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.