Correlation Between Deutsche Bank and Applied Materials

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

Diversification Opportunities for Deutsche Bank and Applied Materials

-0.09

Correlation Coefficient

Deutsche Bank  Applied Materials

Good diversification

The 3 months correlation between Deutsche and Applied is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank Aktiengesellscha and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Applied Materials go up and down completely randomly.

Pair Corralation between Deutsche Bank and Applied Materials

Assuming the 90 days trading horizon Deutsche Bank is expected to generate 3.22 times less return on investment than Applied Materials. But when comparing it to its historical volatility, Deutsche Bank Aktiengesellschaft is 1.84 times less risky than Applied Materials. It trades about 0.03 of its potential returns per unit of risk. Applied Materials is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  364,525  in Applied Materials on September 4, 2024 and sell it today you would earn a total of  8,475  from holding Applied Materials or generate 2.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

Deutsche Bank Aktiengesellscha  vs.  Applied Materials

Deutsche Bank Aktien

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Deutsche Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Applied Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Applied Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deutsche Bank and Applied Materials

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

The idea behind Deutsche Bank Aktiengesellschaft and Applied Materials 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.