Correlation Between Sierra E and Deutsche Multi

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

By analyzing existing cross correlation between Sierra E Retirement and Deutsche Multi Asset Moderate, you can compare the effects of market volatilities on Sierra E and Deutsche Multi 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 Sierra E with a short position of Deutsche Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra E and Deutsche Multi.

Diversification Opportunities for Sierra E and Deutsche Multi

0.79

Correlation Coefficient

Sierra E  Deutsche Multi

Poor diversification

The 3 months correlation between Sierra and Deutsche is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Deutsche Multi Asset Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Multi Asset and Sierra E 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 Sierra E Retirement are associated (or correlated) with Deutsche Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Multi Asset has no effect on the direction of Sierra E i.e., Sierra E and Deutsche Multi go up and down completely randomly.

Pair Corralation between Sierra E and Deutsche Multi

Assuming the 90 days horizon Sierra E is expected to generate 2.22 times less return on investment than Deutsche Multi. But when comparing it to its historical volatility, Sierra E Retirement is 1.8 times less risky than Deutsche Multi. It trades about 0.07 of its potential returns per unit of risk. Deutsche Multi Asset Moderate is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  811.00  in Deutsche Multi Asset Moderate on September 14, 2024 and sell it today you would earn a total of  217.00  from holding Deutsche Multi Asset Moderate or generate 26.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Sierra E Retirement  vs.  Deutsche Multi Asset Moderate

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sierra E Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sierra E is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Deutsche Multi Asset

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Multi Asset Moderate are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Deutsche Multi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sierra E and Deutsche Multi

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

The idea behind Sierra E Retirement and Deutsche Multi Asset Moderate 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.