Correlation Between Magazine Luiza and Deutsche Bank

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

By analyzing existing cross correlation between Magazine Luiza SA and Deutsche Bank Aktiengesellschaft, you can compare the effects of market volatilities on Magazine Luiza and Deutsche Bank 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 Magazine Luiza with a short position of Deutsche Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magazine Luiza and Deutsche Bank.

Diversification Opportunities for Magazine Luiza and Deutsche Bank

-0.76

Correlation Coefficient

Magazine Luiza  Deutsche Bank

Pay attention - limited upside

The 3 months correlation between Magazine and Deutsche is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Magazine Luiza SA and Deutsche Bank Aktiengesellscha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Bank Aktien and Magazine Luiza 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 Magazine Luiza SA are associated (or correlated) with Deutsche Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Bank Aktien has no effect on the direction of Magazine Luiza i.e., Magazine Luiza and Deutsche Bank go up and down completely randomly.

Pair Corralation between Magazine Luiza and Deutsche Bank

Assuming the 90 days trading horizon Magazine Luiza SA is expected to under-perform the Deutsche Bank. In addition to that, Magazine Luiza is 2.2 times more volatile than Deutsche Bank Aktiengesellschaft. It trades about -0.25 of its total potential returns per unit of risk. Deutsche Bank Aktiengesellschaft is currently generating about 0.13 per unit of volatility. If you would invest  9,870  in Deutsche Bank Aktiengesellschaft on October 7, 2024 and sell it today you would earn a total of  930.00  from holding Deutsche Bank Aktiengesellschaft or generate 9.42% return on investment over 90 days.

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

Magazine Luiza SA  vs.  Deutsche Bank Aktiengesellscha

Magazine Luiza SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magazine Luiza SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Deutsche Bank Aktien

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Deutsche Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magazine Luiza and Deutsche Bank

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

The idea behind Magazine Luiza SA and Deutsche Bank Aktiengesellschaft 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.