Correlation Between Deutsche Bank and HomeTrust Bancshares

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

Diversification Opportunities for Deutsche Bank and HomeTrust Bancshares

0.06

Correlation Coefficient

Deutsche Bank  HomeTrust Bancshares

Significant diversification

The 3 months correlation between Deutsche and HomeTrust is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust 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 HomeTrust Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeTrust Bancshares has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between Deutsche Bank and HomeTrust Bancshares

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 1.0 times more return on investment than HomeTrust Bancshares. However, Deutsche Bank is 1.0 times more volatile than HomeTrust Bancshares. It trades about 0.24 of its potential returns per unit of risk. HomeTrust Bancshares is currently generating about -0.01 per unit of risk. If you would invest  1,708  in Deutsche Bank AG on December 1, 2024 and sell it today you would earn a total of  441.00  from holding Deutsche Bank AG or generate 25.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.33%
Values	Daily Returns

Deutsche Bank AG  vs.  HomeTrust 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 18 (%) 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.

HomeTrust Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days HomeTrust Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, HomeTrust Bancshares is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Deutsche Bank and HomeTrust Bancshares

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

The idea behind Deutsche Bank AG and HomeTrust 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.