Correlation Between Deutsche Bank and Aozora Bank

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

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

Diversification Opportunities for Deutsche Bank and Aozora Bank

0.09

Correlation Coefficient

Deutsche Bank  Aozora Bank

Significant diversification

The 3 months correlation between Deutsche and Aozora is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Aozora Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aozora Bank and Deutsche Bank 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 Bank AG are associated (or correlated) with Aozora Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aozora Bank has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Aozora Bank go up and down completely randomly.

Pair Corralation between Deutsche Bank and Aozora Bank

If you would invest  1,648  in Deutsche Bank AG on September 24, 2024 and sell it today you would earn a total of  52.00  from holding Deutsche Bank AG or generate 3.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Deutsche Bank AG  vs.  Aozora Bank Ltd

Deutsche Bank AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Bank AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Deutsche Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Aozora Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aozora Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Aozora Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deutsche Bank and Aozora Bank

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

The idea behind Deutsche Bank AG and Aozora Bank Ltd 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.