Correlation Between Deutsche Equity and Deutsche Croci

Can any of the company-specific risk be diversified away by investing in both Deutsche Equity and Deutsche Croci 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 Croci 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 Croci Equity, you can compare the effects of market volatilities on Deutsche Equity and Deutsche Croci 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 Croci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Equity and Deutsche Croci.

Diversification Opportunities for Deutsche Equity and Deutsche Croci

0.92

Correlation Coefficient

Deutsche Equity  Deutsche Croci

Almost no diversification

The 3 months correlation between Deutsche and Deutsche is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Equity 500 and Deutsche Croci Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Croci Equity 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 Croci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Croci Equity has no effect on the direction of Deutsche Equity i.e., Deutsche Equity and Deutsche Croci go up and down completely randomly.

Pair Corralation between Deutsche Equity and Deutsche Croci

Assuming the 90 days horizon Deutsche Equity 500 is expected to generate 1.06 times more return on investment than Deutsche Croci. However, Deutsche Equity is 1.06 times more volatile than Deutsche Croci Equity. It trades about 0.19 of its potential returns per unit of risk. Deutsche Croci Equity is currently generating about 0.12 per unit of risk. If you would invest  17,535  in Deutsche Equity 500 on September 12, 2024 and sell it today you would earn a total of  1,430  from holding Deutsche Equity 500 or generate 8.16% return on investment over 90 days.

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

Deutsche Equity 500  vs.  Deutsche Croci Equity

Deutsche Equity 500

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Equity 500 are ranked lower than 14 (%) 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 Croci Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Croci Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Deutsche Croci 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 Croci

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

The idea behind Deutsche Equity 500 and Deutsche Croci Equity 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.