Correlation Between DEUTSCHE MID and Financial Investors

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

By analyzing existing cross correlation between DEUTSCHE MID CAP and Financial Investors Trust, you can compare the effects of market volatilities on DEUTSCHE MID and Financial Investors 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 MID with a short position of Financial Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of DEUTSCHE MID and Financial Investors.

Diversification Opportunities for DEUTSCHE MID and Financial Investors

0.2

Correlation Coefficient

DEUTSCHE MID  Financial Investors

Modest diversification

The 3 months correlation between DEUTSCHE and Financial is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding DEUTSCHE MID CAP and Financial Investors Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Investors Trust and DEUTSCHE MID 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 MID CAP are associated (or correlated) with Financial Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Investors Trust has no effect on the direction of DEUTSCHE MID i.e., DEUTSCHE MID and Financial Investors go up and down completely randomly.

Pair Corralation between DEUTSCHE MID and Financial Investors

Assuming the 90 days horizon DEUTSCHE MID is expected to generate 1.13 times less return on investment than Financial Investors. But when comparing it to its historical volatility, DEUTSCHE MID CAP is 3.78 times less risky than Financial Investors. It trades about 0.08 of its potential returns per unit of risk. Financial Investors Trust is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,614  in Financial Investors Trust on October 3, 2024 and sell it today you would earn a total of  151.00  from holding Financial Investors Trust or generate 9.36% return on investment over 90 days.

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

DEUTSCHE MID CAP  vs.  Financial Investors Trust

DEUTSCHE MID CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DEUTSCHE MID CAP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, DEUTSCHE MID is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Financial Investors Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financial Investors Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with DEUTSCHE MID and Financial Investors

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

The idea behind DEUTSCHE MID CAP and Financial Investors Trust 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.