Correlation Between Deutsche Bank and PennantPark Investment

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

Diversification Opportunities for Deutsche Bank and PennantPark Investment

0.03

Correlation Coefficient

Deutsche Bank  PennantPark Investment

Significant diversification

The 3 months correlation between Deutsche and PennantPark is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment 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 PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and PennantPark Investment go up and down completely randomly.

Pair Corralation between Deutsche Bank and PennantPark Investment

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 1.53 times more return on investment than PennantPark Investment. However, Deutsche Bank is 1.53 times more volatile than PennantPark Investment. It trades about 0.08 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.04 per unit of risk. If you would invest  1,660  in Deutsche Bank AG on September 17, 2024 and sell it today you would earn a total of  129.00  from holding Deutsche Bank AG or generate 7.77% return on investment over 90 days.

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

Deutsche Bank AG  vs.  PennantPark Investment

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.

PennantPark Investment

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PennantPark Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Deutsche Bank and PennantPark Investment

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

The idea behind Deutsche Bank AG and PennantPark Investment 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..