Correlation Between Deutsche Bank and Ambev SA

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

Diversification Opportunities for Deutsche Bank and Ambev SA

0.67

Correlation Coefficient

Deutsche Bank  Ambev SA

Poor diversification

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

Pair Corralation between Deutsche Bank and Ambev SA

Assuming the 90 days trading horizon Deutsche Bank Aktiengesellschaft is expected to generate 1.61 times more return on investment than Ambev SA. However, Deutsche Bank is 1.61 times more volatile than Ambev SA. It trades about 0.2 of its potential returns per unit of risk. Ambev SA is currently generating about 0.15 per unit of risk. If you would invest  35,804  in Deutsche Bank Aktiengesellschaft on December 23, 2024 and sell it today you would earn a total of  13,736  from holding Deutsche Bank Aktiengesellschaft or generate 38.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Deutsche Bank Aktiengesellscha  vs.  Ambev SA

Deutsche Bank Aktien

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Deutsche Bank showed solid returns over the last few months and may actually be approaching a breakup point.

Ambev SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Ambev SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Bank and Ambev SA

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

The idea behind Deutsche Bank Aktiengesellschaft and Ambev SA 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.