Correlation Between Deutsche Bank and Royce Micro

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

Diversification Opportunities for Deutsche Bank and Royce Micro

0.19

Correlation Coefficient

Deutsche Bank  Royce Micro

Average diversification

The 3 months correlation between Deutsche and Royce is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Royce Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Micro Cap 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 Royce Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Micro Cap has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Royce Micro go up and down completely randomly.

Pair Corralation between Deutsche Bank and Royce Micro

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 1.33 times more return on investment than Royce Micro. However, Deutsche Bank is 1.33 times more volatile than Royce Micro Cap. It trades about 0.08 of its potential returns per unit of risk. Royce Micro Cap is currently generating about 0.09 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.  Royce Micro Cap

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.

Royce Micro Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Micro Cap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal primary indicators, Royce Micro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Deutsche Bank and Royce Micro

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

The idea behind Deutsche Bank AG and Royce Micro Cap 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.