Correlation Between Deutsche Bank and Ares Management

Can any of the company-specific risk be diversified away by investing in both Deutsche Bank and Ares Management 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 Ares Management 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 Ares Management LP, you can compare the effects of market volatilities on Deutsche Bank and Ares Management 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 Ares Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Bank and Ares Management.

Diversification Opportunities for Deutsche Bank and Ares Management

0.42

Correlation Coefficient

Deutsche Bank  Ares Management

Very weak diversification

The 3 months correlation between Deutsche and Ares is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Ares Management LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Management LP 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 Ares Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Management LP has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Ares Management go up and down completely randomly.

Pair Corralation between Deutsche Bank and Ares Management

Allowing for the 90-day total investment horizon Deutsche Bank is expected to generate 2.15 times less return on investment than Ares Management. But when comparing it to its historical volatility, Deutsche Bank AG is 1.05 times less risky than Ares Management. It trades about 0.11 of its potential returns per unit of risk. Ares Management LP is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  14,647  in Ares Management LP on September 13, 2024 and sell it today you would earn a total of  3,598  from holding Ares Management LP or generate 24.56% return on investment over 90 days.

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

Deutsche Bank AG  vs.  Ares Management LP

Deutsche Bank AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 8 (%) 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.

Ares Management LP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Ares Management unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Bank and Ares Management

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

The idea behind Deutsche Bank AG and Ares Management LP 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.