Correlation Between Deutsche Global and Deutsche Equity

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

By analyzing existing cross correlation between Deutsche Global Small and Deutsche Equity 500, you can compare the effects of market volatilities on Deutsche Global and Deutsche Equity 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 Global with a short position of Deutsche Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Global and Deutsche Equity.

Diversification Opportunities for Deutsche Global and Deutsche Equity

0.86

Correlation Coefficient

Deutsche Global  Deutsche Equity

Very poor diversification

The 3 months correlation between Deutsche and Deutsche is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Global Small and Deutsche Equity 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Equity 500 and Deutsche Global 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 Global Small are associated (or correlated) with Deutsche Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Equity 500 has no effect on the direction of Deutsche Global i.e., Deutsche Global and Deutsche Equity go up and down completely randomly.

Pair Corralation between Deutsche Global and Deutsche Equity

Assuming the 90 days horizon Deutsche Global is expected to generate 5.24 times less return on investment than Deutsche Equity. But when comparing it to its historical volatility, Deutsche Global Small is 1.04 times less risky than Deutsche Equity. It trades about 0.01 of its potential returns per unit of risk. Deutsche Equity 500 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  14,857  in Deutsche Equity 500 on October 7, 2024 and sell it today you would earn a total of  1,108  from holding Deutsche Equity 500 or generate 7.46% return on investment over 90 days.

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

Deutsche Global Small  vs.  Deutsche Equity 500

Deutsche Global Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Global Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Deutsche Equity 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Equity 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Deutsche Global and Deutsche Equity

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

The idea behind Deutsche Global Small and Deutsche Equity 500 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.