Correlation Between Deutsche and Nasdaq

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

By analyzing existing cross correlation between Deutsche Bank 45 and Nasdaq Inc, you can compare the effects of market volatilities on Deutsche and Nasdaq 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 with a short position of Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche and Nasdaq.

Diversification Opportunities for Deutsche and Nasdaq

-0.05

Correlation Coefficient

Deutsche  Nasdaq

Good diversification

The 3 months correlation between Deutsche and Nasdaq is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank 45 and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc and Deutsche 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 Bank 45 are associated (or correlated) with Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Deutsche i.e., Deutsche and Nasdaq go up and down completely randomly.

Pair Corralation between Deutsche and Nasdaq

Assuming the 90 days trading horizon Deutsche is expected to generate 28.67 times less return on investment than Nasdaq. But when comparing it to its historical volatility, Deutsche Bank 45 is 7.61 times less risky than Nasdaq. It trades about 0.01 of its potential returns per unit of risk. Nasdaq Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,992  in Nasdaq Inc on November 19, 2024 and sell it today you would earn a total of  99.00  from holding Nasdaq Inc or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.89%
Values	Daily Returns

Deutsche Bank 45  vs.  Nasdaq Inc

Deutsche Bank 45

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deutsche Bank 45 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Deutsche is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nasdaq Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Deutsche and Nasdaq

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

The idea behind Deutsche Bank 45 and Nasdaq Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.