Correlation Between Deutsche Bank and Tennessee Valley

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

Diversification Opportunities for Deutsche Bank and Tennessee Valley

0.12

Correlation Coefficient

Deutsche Bank  Tennessee Valley

Average diversification

The 3 months correlation between Deutsche and Tennessee is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Tennessee Valley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tennessee Valley Fin 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 Tennessee Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tennessee Valley Fin has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Tennessee Valley go up and down completely randomly.

Pair Corralation between Deutsche Bank and Tennessee Valley

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 0.87 times more return on investment than Tennessee Valley. However, Deutsche Bank AG is 1.15 times less risky than Tennessee Valley. It trades about 0.06 of its potential returns per unit of risk. Tennessee Valley Financial is currently generating about 0.05 per unit of risk. If you would invest  1,322  in Deutsche Bank AG on September 25, 2024 and sell it today you would earn a total of  394.00  from holding Deutsche Bank AG or generate 29.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	82.66%
Values	Daily Returns

Deutsche Bank AG  vs.  Tennessee Valley Financial

Deutsche Bank AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Deutsche Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Tennessee Valley Fin

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tennessee Valley Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Tennessee Valley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Deutsche Bank and Tennessee Valley

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

The idea behind Deutsche Bank AG and Tennessee Valley Financial 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.