Correlation Between OTP Bank and Deutsche Bank

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

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

Diversification Opportunities for OTP Bank and Deutsche Bank

0.85

Correlation Coefficient

OTP Bank  Deutsche Bank

Very poor diversification

The 3 months correlation between OTP and Deutsche is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding OTP Bank Nyrt and Deutsche Bank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Bank AG and OTP 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 OTP Bank Nyrt 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 AG has no effect on the direction of OTP Bank i.e., OTP Bank and Deutsche Bank go up and down completely randomly.

Pair Corralation between OTP Bank and Deutsche Bank

Assuming the 90 days trading horizon OTP Bank is expected to generate 1.66 times less return on investment than Deutsche Bank. But when comparing it to its historical volatility, OTP Bank Nyrt is 1.9 times less risky than Deutsche Bank. It trades about 0.15 of its potential returns per unit of risk. Deutsche Bank AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  582,300  in Deutsche Bank AG on September 14, 2024 and sell it today you would earn a total of  119,600  from holding Deutsche Bank AG or generate 20.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	52.38%
Values	Daily Returns

OTP Bank Nyrt  vs.  Deutsche Bank AG

OTP Bank Nyrt

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, OTP Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Bank AG

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Deutsche Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OTP Bank and Deutsche Bank

The main advantage of trading using opposite OTP Bank and Deutsche Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OTP Bank 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 OTP Bank Nyrt and Deutsche Bank AG 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.