Correlation Between United States and Deutsche Bank

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

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

Diversification Opportunities for United States and Deutsche Bank

0.1

Correlation Coefficient

United States  Deutsche Bank

Average diversification

The 3 months correlation between United and Deutsche is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Deutsche Bank Aktiengesellscha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Bank Aktien and United States 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 United States Steel are associated (or correlated) with Deutsche Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Bank Aktien has no effect on the direction of United States i.e., United States and Deutsche Bank go up and down completely randomly.

Pair Corralation between United States and Deutsche Bank

Given the investment horizon of 90 days United States is expected to generate 1.11 times less return on investment than Deutsche Bank. In addition to that, United States is 1.01 times more volatile than Deutsche Bank Aktiengesellschaft. It trades about 0.19 of its total potential returns per unit of risk. Deutsche Bank Aktiengesellschaft is currently generating about 0.21 per unit of volatility. If you would invest  35,804  in Deutsche Bank Aktiengesellschaft on December 30, 2024 and sell it today you would earn a total of  13,736  from holding Deutsche Bank Aktiengesellschaft or generate 38.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.32%
Values	Daily Returns

United States Steel  vs.  Deutsche Bank Aktiengesellscha

United States Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, United States showed solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Bank Aktien

Risk-Adjusted Performance

Solid

Over the last 90 days Deutsche Bank Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Deutsche Bank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and Deutsche Bank

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

The idea behind United States Steel and Deutsche Bank Aktiengesellschaft 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.