Correlation Between Deutsche Bank and Federated Investors

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

Diversification Opportunities for Deutsche Bank and Federated Investors

-0.6

Correlation Coefficient

Deutsche Bank  Federated Investors

Excellent diversification

The 3 months correlation between Deutsche and Federated is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Federated Investors B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Investors 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 Federated Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Investors has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Federated Investors go up and down completely randomly.

Pair Corralation between Deutsche Bank and Federated Investors

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 2.9 times more return on investment than Federated Investors. However, Deutsche Bank is 2.9 times more volatile than Federated Investors B. It trades about 0.26 of its potential returns per unit of risk. Federated Investors B is currently generating about 0.05 per unit of risk. If you would invest  1,748  in Deutsche Bank AG on December 11, 2024 and sell it today you would earn a total of  574.00  from holding Deutsche Bank AG or generate 32.84% return on investment over 90 days.

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

Deutsche Bank AG  vs.  Federated Investors B

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 14 (%) 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.

Federated Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Investors B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Deutsche Bank and Federated Investors

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

The idea behind Deutsche Bank AG and Federated Investors B 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.