Correlation Between JAPAN TOBACCO and Deutsche Bank

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

By analyzing existing cross correlation between JAPAN TOBACCO UNSPADR12 and Deutsche Bank Aktiengesellschaft, you can compare the effects of market volatilities on JAPAN TOBACCO and Deutsche Bank 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 JAPAN TOBACCO with a short position of Deutsche Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and Deutsche Bank.

Diversification Opportunities for JAPAN TOBACCO and Deutsche Bank

0.27

Correlation Coefficient

JAPAN TOBACCO  Deutsche Bank

Modest diversification

The 3 months correlation between JAPAN and Deutsche is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and Deutsche Bank Aktiengesellscha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Bank Aktien and JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12 are associated (or correlated) with Deutsche Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Bank Aktien has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and Deutsche Bank go up and down completely randomly.

Pair Corralation between JAPAN TOBACCO and Deutsche Bank

Assuming the 90 days trading horizon JAPAN TOBACCO is expected to generate 5.24 times less return on investment than Deutsche Bank. But when comparing it to its historical volatility, JAPAN TOBACCO UNSPADR12 is 1.06 times less risky than Deutsche Bank. It trades about 0.02 of its potential returns per unit of risk. Deutsche Bank Aktiengesellschaft is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,519  in Deutsche Bank Aktiengesellschaft on September 22, 2024 and sell it today you would earn a total of  106.00  from holding Deutsche Bank Aktiengesellschaft or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

JAPAN TOBACCO UNSPADR12  vs.  Deutsche Bank Aktiengesellscha

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN TOBACCO UNSPADR12 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, JAPAN TOBACCO is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 comparatively fragile forward-looking signals, Deutsche Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with JAPAN TOBACCO and Deutsche Bank

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

The idea behind JAPAN TOBACCO UNSPADR12 and Deutsche Bank Aktiengesellschaft 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.