Correlation Between Deutsche Bank and AB SKF

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

Diversification Opportunities for Deutsche Bank and AB SKF

0.67

Correlation Coefficient

Deutsche Bank  AB SKF

Poor diversification

The 3 months correlation between Deutsche and SKFA is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank Aktiengesellscha and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF 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 AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and AB SKF go up and down completely randomly.

Pair Corralation between Deutsche Bank and AB SKF

Assuming the 90 days trading horizon Deutsche Bank Aktiengesellschaft is expected to generate 0.63 times more return on investment than AB SKF. However, Deutsche Bank Aktiengesellschaft is 1.6 times less risky than AB SKF. It trades about 0.08 of its potential returns per unit of risk. AB SKF is currently generating about 0.05 per unit of risk. If you would invest  1,589  in Deutsche Bank Aktiengesellschaft on October 8, 2024 and sell it today you would earn a total of  90.00  from holding Deutsche Bank Aktiengesellschaft or generate 5.66% return on investment over 90 days.

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

Deutsche Bank Aktiengesellscha  vs.  AB SKF

Deutsche Bank Aktien

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, Deutsche Bank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AB SKF

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, AB SKF is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Deutsche Bank and AB SKF

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

The idea behind Deutsche Bank Aktiengesellschaft and AB SKF 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.