Correlation Between Deutsche Bank and Agriculture Natural

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

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

Diversification Opportunities for Deutsche Bank and Agriculture Natural

0.24

Correlation Coefficient

Deutsche Bank  Agriculture Natural

Modest diversification

The 3 months correlation between Deutsche and Agriculture is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Agriculture Natural Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agriculture Natural and Deutsche Bank 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 AG are associated (or correlated) with Agriculture Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agriculture Natural has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Agriculture Natural go up and down completely randomly.

Pair Corralation between Deutsche Bank and Agriculture Natural

Allowing for the 90-day total investment horizon Deutsche Bank is expected to generate 8.62 times less return on investment than Agriculture Natural. But when comparing it to its historical volatility, Deutsche Bank AG is 5.82 times less risky than Agriculture Natural. It trades about 0.08 of its potential returns per unit of risk. Agriculture Natural Solutions is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Agriculture Natural Solutions on September 17, 2024 and sell it today you would earn a total of  8.00  from holding Agriculture Natural Solutions or generate 36.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.38%
Values	Daily Returns

Deutsche Bank AG  vs.  Agriculture Natural Solutions

Deutsche Bank AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Deutsche Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Agriculture Natural

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agriculture Natural Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Agriculture Natural showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Bank and Agriculture Natural

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

The idea behind Deutsche Bank AG and Agriculture Natural Solutions 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 Valuation module to check real value of public entities based on technical and fundamental data.