Correlation Between Deutsche Bank and Community West

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

Diversification Opportunities for Deutsche Bank and Community West

-0.47

Correlation Coefficient

Deutsche Bank  Community West

Very good diversification

The 3 months correlation between Deutsche and Community is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Community West Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community West Bancshares 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 Community West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community West Bancshares has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Community West go up and down completely randomly.

Pair Corralation between Deutsche Bank and Community West

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 1.96 times more return on investment than Community West. However, Deutsche Bank is 1.96 times more volatile than Community West Bancshares. It trades about 0.22 of its potential returns per unit of risk. Community West Bancshares is currently generating about -0.05 per unit of risk. If you would invest  1,712  in Deutsche Bank AG on December 30, 2024 and sell it today you would earn a total of  684.00  from holding Deutsche Bank AG or generate 39.95% return on investment over 90 days.

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

Deutsche Bank AG  vs.  Community West Bancshares

Deutsche Bank AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Deutsche Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Community West Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community West Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Community West is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Deutsche Bank and Community West

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

The idea behind Deutsche Bank AG and Community West Bancshares 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.