Correlation Between City National and Deutsche Small

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

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

Diversification Opportunities for City National and Deutsche Small

0.67

Correlation Coefficient

City National  Deutsche Small

Poor diversification

The 3 months correlation between City and Deutsche is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding City National Rochdale and Deutsche Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Small Cap and City National 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 City National Rochdale are associated (or correlated) with Deutsche Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Small Cap has no effect on the direction of City National i.e., City National and Deutsche Small go up and down completely randomly.

Pair Corralation between City National and Deutsche Small

Assuming the 90 days horizon City National is expected to generate 5.35 times less return on investment than Deutsche Small. But when comparing it to its historical volatility, City National Rochdale is 12.99 times less risky than Deutsche Small. It trades about 0.24 of its potential returns per unit of risk. Deutsche Small Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,578  in Deutsche Small Cap on September 13, 2024 and sell it today you would earn a total of  229.00  from holding Deutsche Small Cap or generate 6.4% return on investment over 90 days.

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

City National Rochdale  vs.  Deutsche Small Cap

City National Rochdale

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in City National Rochdale are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, City National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Deutsche Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Deutsche Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with City National and Deutsche Small

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

The idea behind City National Rochdale and Deutsche Small Cap 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.