Correlation Between Deutsche Capital and Deutsche Large

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

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

Diversification Opportunities for Deutsche Capital and Deutsche Large

0.87

Correlation Coefficient

Deutsche Capital  Deutsche Large

Very poor diversification

The 3 months correlation between Deutsche and Deutsche is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Capital Growth and Deutsche Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Large Cap and Deutsche Capital 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 Capital Growth are associated (or correlated) with Deutsche Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Large Cap has no effect on the direction of Deutsche Capital i.e., Deutsche Capital and Deutsche Large go up and down completely randomly.

Pair Corralation between Deutsche Capital and Deutsche Large

Assuming the 90 days horizon Deutsche Capital is expected to generate 1.34 times less return on investment than Deutsche Large. But when comparing it to its historical volatility, Deutsche Capital Growth is 1.09 times less risky than Deutsche Large. It trades about 0.17 of its potential returns per unit of risk. Deutsche Large Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  8,634  in Deutsche Large Cap on September 12, 2024 and sell it today you would earn a total of  1,062  from holding Deutsche Large Cap or generate 12.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Deutsche Capital Growth  vs.  Deutsche Large Cap

Deutsche Capital Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Capital Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Deutsche Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deutsche Large Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Large Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Deutsche Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Deutsche Capital and Deutsche Large

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

The idea behind Deutsche Capital Growth and Deutsche Large 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.