Correlation Between Deutsche Core and Deutsche Small

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

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

Diversification Opportunities for Deutsche Core and Deutsche Small

0.92

Correlation Coefficient

Deutsche Core  Deutsche Small

Almost no diversification

The 3 months correlation between Deutsche and DEUTSCHE is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche E Equity 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 Deutsche Core 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 E Equity 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 Deutsche Core i.e., Deutsche Core and Deutsche Small go up and down completely randomly.

Pair Corralation between Deutsche Core and Deutsche Small

Assuming the 90 days horizon Deutsche E Equity is expected to generate 0.9 times more return on investment than Deutsche Small. However, Deutsche E Equity is 1.11 times less risky than Deutsche Small. It trades about -0.1 of its potential returns per unit of risk. Deutsche Small Cap is currently generating about -0.1 per unit of risk. If you would invest  3,432  in Deutsche E Equity on December 30, 2024 and sell it today you would lose (217.00) from holding Deutsche E Equity or give up 6.32% of portfolio value over 90 days.

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

Deutsche E Equity  vs.  Deutsche Small Cap

Deutsche E Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deutsche E Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Deutsche Core 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

Very Weak

Over the last 90 days Deutsche Small Cap 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 Core and Deutsche Small

The main advantage of trading using opposite Deutsche Core and Deutsche Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Core 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 Deutsche E Equity 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.