Correlation Between Deutsche Bank and Broadwind

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

Diversification Opportunities for Deutsche Bank and Broadwind

-0.11

Correlation Coefficient

Deutsche Bank  Broadwind

Good diversification

The 3 months correlation between Deutsche and Broadwind is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank Aktiengesellscha and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind 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 Broadwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Broadwind go up and down completely randomly.

Pair Corralation between Deutsche Bank and Broadwind

Assuming the 90 days trading horizon Deutsche Bank is expected to generate 1.34 times less return on investment than Broadwind. But when comparing it to its historical volatility, Deutsche Bank Aktiengesellschaft is 3.04 times less risky than Broadwind. It trades about 0.11 of its potential returns per unit of risk. Broadwind is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  183.00  in Broadwind on October 6, 2024 and sell it today you would earn a total of  9.00  from holding Broadwind or generate 4.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Deutsche Bank Aktiengesellscha  vs.  Broadwind

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 fragile forward-looking signals, Deutsche Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Broadwind

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Broadwind are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Broadwind may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Deutsche Bank and Broadwind

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

The idea behind Deutsche Bank Aktiengesellschaft and Broadwind 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.