Correlation Between Deutsche Bank and Brookfield Corp

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

Diversification Opportunities for Deutsche Bank and Brookfield Corp

0.36

Correlation Coefficient

Deutsche Bank  Brookfield Corp

Weak diversification

The 3 months correlation between Deutsche and Brookfield is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Brookfield Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Corp 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 Brookfield Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Corp has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Brookfield Corp go up and down completely randomly.

Pair Corralation between Deutsche Bank and Brookfield Corp

Allowing for the 90-day total investment horizon Deutsche Bank is expected to generate 3.22 times less return on investment than Brookfield Corp. In addition to that, Deutsche Bank is 1.22 times more volatile than Brookfield Corp. It trades about 0.07 of its total potential returns per unit of risk. Brookfield Corp is currently generating about 0.28 per unit of volatility. If you would invest  4,784  in Brookfield Corp on September 3, 2024 and sell it today you would earn a total of  1,367  from holding Brookfield Corp or generate 28.57% return on investment over 90 days.

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

Deutsche Bank AG  vs.  Brookfield Corp

Deutsche Bank AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 5 (%) 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.

Brookfield Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brookfield Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Bank and Brookfield Corp

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

The idea behind Deutsche Bank AG and Brookfield Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.