Correlation Between Deutsche Bank and Costco Wholesale

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

Diversification Opportunities for Deutsche Bank and Costco Wholesale

-0.1

Correlation Coefficient

Deutsche Bank  Costco Wholesale

Good diversification

The 3 months correlation between Deutsche and Costco is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank Aktiengesellscha and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale 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 Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Costco Wholesale go up and down completely randomly.

Pair Corralation between Deutsche Bank and Costco Wholesale

Assuming the 90 days trading horizon Deutsche Bank Aktiengesellschaft is expected to generate 1.6 times more return on investment than Costco Wholesale. However, Deutsche Bank is 1.6 times more volatile than Costco Wholesale. It trades about 0.21 of its potential returns per unit of risk. Costco Wholesale is currently generating about 0.01 per unit of risk. If you would invest  35,804  in Deutsche Bank Aktiengesellschaft on December 28, 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 Against
Strength	Insignificant
Accuracy	90.32%
Values	Daily Returns

Deutsche Bank Aktiengesellscha  vs.  Costco Wholesale

Deutsche Bank Aktien

Risk-Adjusted Performance

Solid

Over the last 90 days Deutsche Bank Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Costco Wholesale

Risk-Adjusted Performance

Very Weak

Over the last 90 days Costco Wholesale has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Costco Wholesale 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 Costco Wholesale

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

The idea behind Deutsche Bank Aktiengesellschaft and Costco Wholesale 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.