Correlation Between Deutsche Bank and Royce Micro

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

Diversification Opportunities for Deutsche Bank and Royce Micro

-0.76

Correlation Coefficient

Deutsche Bank  Royce Micro

Pay attention - limited upside

The 3 months correlation between Deutsche and Royce is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Royce Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Micro Cap 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 Royce Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Micro Cap has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Royce Micro go up and down completely randomly.

Pair Corralation between Deutsche Bank and Royce Micro

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 2.25 times more return on investment than Royce Micro. However, Deutsche Bank is 2.25 times more volatile than Royce Micro Cap. It trades about 0.26 of its potential returns per unit of risk. Royce Micro Cap is currently generating about -0.13 per unit of risk. If you would invest  1,722  in Deutsche Bank AG on December 26, 2024 and sell it today you would earn a total of  803.00  from holding Deutsche Bank AG or generate 46.63% 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.  Royce Micro Cap

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 20 (%) 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.

Royce Micro Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Micro Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Deutsche Bank and Royce Micro

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

The idea behind Deutsche Bank AG and Royce Micro Cap 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.