Correlation Between Deutsche Equity and Deutsche Real

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

By analyzing existing cross correlation between Deutsche Equity 500 and Deutsche Real Assets, you can compare the effects of market volatilities on Deutsche Equity and Deutsche Real 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 Equity with a short position of Deutsche Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Equity and Deutsche Real.

Diversification Opportunities for Deutsche Equity and Deutsche Real

-0.32

Correlation Coefficient

Deutsche Equity  Deutsche Real

Very good diversification

The 3 months correlation between Deutsche and Deutsche is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Equity 500 and Deutsche Real Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Real Assets and Deutsche Equity 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 Equity 500 are associated (or correlated) with Deutsche Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Real Assets has no effect on the direction of Deutsche Equity i.e., Deutsche Equity and Deutsche Real go up and down completely randomly.

Pair Corralation between Deutsche Equity and Deutsche Real

Assuming the 90 days horizon Deutsche Equity 500 is expected to generate 1.36 times more return on investment than Deutsche Real. However, Deutsche Equity is 1.36 times more volatile than Deutsche Real Assets. It trades about 0.18 of its potential returns per unit of risk. Deutsche Real Assets is currently generating about -0.09 per unit of risk. If you would invest  17,659  in Deutsche Equity 500 on September 16, 2024 and sell it today you would earn a total of  1,358  from holding Deutsche Equity 500 or generate 7.69% return on investment over 90 days.

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

Deutsche Equity 500  vs.  Deutsche Real Assets

Deutsche Equity 500

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Equity 500 are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Deutsche Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deutsche Real Assets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Real Assets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Deutsche Real 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 Equity and Deutsche Real

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

The idea behind Deutsche Equity 500 and Deutsche Real Assets 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.