Correlation Between Deutsche Bank and Prudential Financial

Can any of the company-specific risk be diversified away by investing in both Deutsche Bank and Prudential Financial 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 Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deutsche Bank Aktiengesellschaft and Prudential Financial, you can compare the effects of market volatilities on Deutsche Bank and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Bank and Prudential Financial.

Diversification Opportunities for Deutsche Bank and Prudential Financial

0.16

Correlation Coefficient

Deutsche Bank  Prudential Financial

Average diversification

The 3 months correlation between Deutsche and Prudential is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank Aktiengesellscha and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Aktiengesellschaft are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Prudential Financial go up and down completely randomly.

Pair Corralation between Deutsche Bank and Prudential Financial

Assuming the 90 days trading horizon Deutsche Bank Aktiengesellschaft is expected to generate 8.5 times more return on investment than Prudential Financial. However, Deutsche Bank is 8.5 times more volatile than Prudential Financial. It trades about 0.08 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.13 per unit of risk. If you would invest  32,120  in Deutsche Bank Aktiengesellschaft on September 2, 2024 and sell it today you would earn a total of  2,084  from holding Deutsche Bank Aktiengesellschaft or generate 6.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Deutsche Bank Aktiengesellscha  vs.  Prudential Financial

Deutsche Bank Aktien

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Deutsche Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Prudential Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Prudential Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deutsche Bank and Prudential Financial

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

The idea behind Deutsche Bank Aktiengesellschaft and Prudential 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.