Correlation Between Deutsche Bank and Oversea-Chinese BankingLimited

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

Diversification Opportunities for Deutsche Bank and Oversea-Chinese BankingLimited

0.55

Correlation Coefficient

Deutsche Bank  Oversea-Chinese BankingLimited

Very weak diversification

The 3 months correlation between Deutsche and Oversea-Chinese is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank Aktiengesellscha and Oversea Chinese Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oversea-Chinese BankingLimited 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 Oversea-Chinese BankingLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oversea-Chinese BankingLimited has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Oversea-Chinese BankingLimited go up and down completely randomly.

Pair Corralation between Deutsche Bank and Oversea-Chinese BankingLimited

Assuming the 90 days horizon Deutsche Bank is expected to generate 15.96 times less return on investment than Oversea-Chinese BankingLimited. But when comparing it to its historical volatility, Deutsche Bank Aktiengesellschaft is 1.35 times less risky than Oversea-Chinese BankingLimited. It trades about 0.01 of its potential returns per unit of risk. Oversea Chinese Banking is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,157  in Oversea Chinese Banking on October 10, 2024 and sell it today you would earn a total of  34.00  from holding Oversea Chinese Banking or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Deutsche Bank Aktiengesellscha  vs.  Oversea Chinese Banking

Deutsche Bank Aktien

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Deutsche Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Oversea-Chinese BankingLimited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oversea Chinese Banking are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Oversea-Chinese BankingLimited reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Bank and Oversea-Chinese BankingLimited

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

The idea behind Deutsche Bank Aktiengesellschaft and Oversea Chinese Banking 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.