Correlation Between Deutsche Bank and Alibaba Group

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

Diversification Opportunities for Deutsche Bank and Alibaba Group

0.28

Correlation Coefficient

Deutsche Bank  Alibaba Group

Modest diversification

The 3 months correlation between Deutsche and Alibaba is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank Aktiengesellscha and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding 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 Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Alibaba Group go up and down completely randomly.

Pair Corralation between Deutsche Bank and Alibaba Group

Assuming the 90 days trading horizon Deutsche Bank Aktiengesellschaft is expected to generate 0.66 times more return on investment than Alibaba Group. However, Deutsche Bank Aktiengesellschaft is 1.53 times less risky than Alibaba Group. It trades about 0.24 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.03 per unit of risk. If you would invest  33,811  in Deutsche Bank Aktiengesellschaft on September 17, 2024 and sell it today you would earn a total of  1,993  from holding Deutsche Bank Aktiengesellschaft or generate 5.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	84.21%
Values	Daily Returns

Deutsche Bank Aktiengesellscha  vs.  Alibaba Group Holding

Deutsche Bank Aktien

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Deutsche Bank showed solid returns over the last few months and may actually be approaching a breakup point.

Alibaba Group Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Alibaba Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Deutsche Bank and Alibaba Group

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

The idea behind Deutsche Bank Aktiengesellschaft and Alibaba Group Holding 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.