Correlation Between Deutsche Bank and Monster Beverage

Can any of the company-specific risk be diversified away by investing in both Deutsche Bank and Monster Beverage 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 Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deutsche Bank Aktiengesellschaft and Monster Beverage, you can compare the effects of market volatilities on Deutsche Bank and Monster Beverage 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 Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Bank and Monster Beverage.

Diversification Opportunities for Deutsche Bank and Monster Beverage

-0.48

Correlation Coefficient

Deutsche Bank  Monster Beverage

Very good diversification

The 3 months correlation between Deutsche and Monster is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank Aktiengesellscha and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage 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 Aktiengesellschaft are associated (or correlated) with Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Monster Beverage go up and down completely randomly.

Pair Corralation between Deutsche Bank and Monster Beverage

Assuming the 90 days trading horizon Deutsche Bank Aktiengesellschaft is expected to generate 0.98 times more return on investment than Monster Beverage. However, Deutsche Bank Aktiengesellschaft is 1.02 times less risky than Monster Beverage. It trades about 0.22 of its potential returns per unit of risk. Monster Beverage is currently generating about 0.0 per unit of risk. If you would invest  10,560  in Deutsche Bank Aktiengesellschaft on December 5, 2024 and sell it today you would earn a total of  3,152  from holding Deutsche Bank Aktiengesellschaft or generate 29.85% return on investment over 90 days.

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

Deutsche Bank Aktiengesellscha  vs.  Monster Beverage

Deutsche Bank Aktien

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Deutsche Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Monster Beverage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monster Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deutsche Bank and Monster Beverage

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

The idea behind Deutsche Bank Aktiengesellschaft and Monster Beverage 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.