Correlation Between Deutsche Bank and GCM Grosvenor

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

Diversification Opportunities for Deutsche Bank and GCM Grosvenor

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Deutsche and GCM is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and GCM Grosvenor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCM Grosvenor 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 GCM Grosvenor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCM Grosvenor has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and GCM Grosvenor go up and down completely randomly.

Pair Corralation between Deutsche Bank and GCM Grosvenor

Allowing for the 90-day total investment horizon Deutsche Bank is expected to generate 86.4 times less return on investment than GCM Grosvenor. But when comparing it to its historical volatility, Deutsche Bank AG is 5.2 times less risky than GCM Grosvenor. It trades about 0.01 of its potential returns per unit of risk. GCM Grosvenor is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  95.00  in GCM Grosvenor on September 5, 2024 and sell it today you would earn a total of  29.00  from holding GCM Grosvenor or generate 30.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy92.86%
ValuesDaily Returns

Deutsche Bank AG  vs.  GCM Grosvenor

 Performance 
       Timeline  
Deutsche Bank AG 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
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.
GCM Grosvenor 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in GCM Grosvenor are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, GCM Grosvenor showed solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Bank and GCM Grosvenor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Deutsche Bank and GCM Grosvenor

The main advantage of trading using opposite Deutsche Bank and GCM Grosvenor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Bank position performs unexpectedly, GCM Grosvenor 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 GCM Grosvenor will offset losses from the drop in GCM Grosvenor's long position.
The idea behind Deutsche Bank AG and GCM Grosvenor 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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