Correlation Between Deutsche Bank and BlackRock

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

Diversification Opportunities for Deutsche Bank and BlackRock

0.44

Correlation Coefficient

Deutsche Bank  BlackRock

Very weak diversification

The 3 months correlation between Deutsche and BlackRock is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock 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 BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and BlackRock go up and down completely randomly.

Pair Corralation between Deutsche Bank and BlackRock

Allowing for the 90-day total investment horizon Deutsche Bank is expected to generate 2.99 times less return on investment than BlackRock. In addition to that, Deutsche Bank is 1.63 times more volatile than BlackRock. It trades about 0.05 of its total potential returns per unit of risk. BlackRock is currently generating about 0.26 per unit of volatility. If you would invest  87,148  in BlackRock on September 5, 2024 and sell it today you would earn a total of  16,752  from holding BlackRock or generate 19.22% return on investment over 90 days.

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

Deutsche Bank AG  vs.  BlackRock

Deutsche Bank AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

BlackRock

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal essential indicators, BlackRock disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Bank and BlackRock

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

The idea behind Deutsche Bank AG and BlackRock 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.