Correlation Between Deutsche Bank and Waste Management

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

Diversification Opportunities for Deutsche Bank and Waste Management

0.54

Correlation Coefficient

Deutsche Bank  Waste Management

Very weak diversification

The 3 months correlation between Deutsche and Waste is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank Aktiengesellscha and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Waste Management go up and down completely randomly.

Pair Corralation between Deutsche Bank and Waste Management

Assuming the 90 days trading horizon Deutsche Bank Aktiengesellschaft is expected to generate 1.83 times more return on investment than Waste Management. However, Deutsche Bank is 1.83 times more volatile than Waste Management. It trades about 0.25 of its potential returns per unit of risk. Waste Management is currently generating about 0.07 per unit of risk. If you would invest  1,635  in Deutsche Bank Aktiengesellschaft on December 23, 2024 and sell it today you would earn a total of  603.00  from holding Deutsche Bank Aktiengesellschaft or generate 36.88% return on investment over 90 days.

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

Deutsche Bank Aktiengesellscha  vs.  Waste Management

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 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward-looking signals, Deutsche Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Waste Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Waste Management is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Deutsche Bank and Waste Management

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

The idea behind Deutsche Bank Aktiengesellschaft and Waste Management 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.