Correlation Between Deutsche Gnma and Deutsche Capital

Can any of the company-specific risk be diversified away by investing in both Deutsche Gnma and Deutsche Capital 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 Gnma and Deutsche Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deutsche Gnma Fund and Deutsche Capital Growth, you can compare the effects of market volatilities on Deutsche Gnma and Deutsche Capital 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 Gnma with a short position of Deutsche Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Gnma and Deutsche Capital.

Diversification Opportunities for Deutsche Gnma and Deutsche Capital

-0.7

Correlation Coefficient

Deutsche Gnma  Deutsche Capital

Excellent diversification

The 3 months correlation between Deutsche and Deutsche is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Gnma Fund and Deutsche Capital Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Capital Growth and Deutsche Gnma 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 Gnma Fund are associated (or correlated) with Deutsche Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Capital Growth has no effect on the direction of Deutsche Gnma i.e., Deutsche Gnma and Deutsche Capital go up and down completely randomly.

Pair Corralation between Deutsche Gnma and Deutsche Capital

Assuming the 90 days horizon Deutsche Gnma Fund is expected to under-perform the Deutsche Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Deutsche Gnma Fund is 2.47 times less risky than Deutsche Capital. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Deutsche Capital Growth is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  12,241  in Deutsche Capital Growth on September 12, 2024 and sell it today you would earn a total of  1,116  from holding Deutsche Capital Growth or generate 9.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Deutsche Gnma Fund  vs.  Deutsche Capital Growth

Deutsche Gnma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Gnma Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Deutsche Gnma is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Deutsche Capital Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Capital Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Deutsche Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Deutsche Gnma and Deutsche Capital

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

The idea behind Deutsche Gnma Fund and Deutsche Capital Growth 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.