Correlation Between Deutsche Bank and Netcapital

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

Diversification Opportunities for Deutsche Bank and Netcapital

-0.51

Correlation Coefficient

Deutsche Bank  Netcapital

Excellent diversification

The 3 months correlation between Deutsche and Netcapital is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Netcapital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcapital 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 Netcapital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcapital has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Netcapital go up and down completely randomly.

Pair Corralation between Deutsche Bank and Netcapital

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 0.24 times more return on investment than Netcapital. However, Deutsche Bank AG is 4.17 times less risky than Netcapital. It trades about 0.06 of its potential returns per unit of risk. Netcapital is currently generating about -0.04 per unit of risk. If you would invest  1,068  in Deutsche Bank AG on September 11, 2024 and sell it today you would earn a total of  711.00  from holding Deutsche Bank AG or generate 66.57% return on investment over 90 days.

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

Deutsche Bank AG  vs.  Netcapital

Deutsche Bank AG

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Deutsche Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Netcapital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Netcapital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Netcapital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Bank and Netcapital

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

The idea behind Deutsche Bank AG and Netcapital 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.