Correlation Between Deutsche Bank and UniCredit SpA

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

Diversification Opportunities for Deutsche Bank and UniCredit SpA

0.29

Correlation Coefficient

Deutsche Bank  UniCredit SpA

Modest diversification

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

Pair Corralation between Deutsche Bank and UniCredit SpA

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 0.89 times more return on investment than UniCredit SpA. However, Deutsche Bank AG is 1.13 times less risky than UniCredit SpA. It trades about 0.0 of its potential returns per unit of risk. UniCredit SpA ADR is currently generating about -0.08 per unit of risk. If you would invest  1,733  in Deutsche Bank AG on September 27, 2024 and sell it today you would lose (11.00) from holding Deutsche Bank AG or give up 0.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Deutsche Bank AG  vs.  UniCredit SpA ADR

Deutsche Bank AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Bank AG has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

UniCredit SpA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UniCredit SpA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Deutsche Bank and UniCredit SpA

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

The idea behind Deutsche Bank AG and UniCredit SpA ADR 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.