Correlation Between Deutsche Real and Bank of America
Can any of the company-specific risk be diversified away by investing in both Deutsche Real and Bank of America 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 Real and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deutsche Real Assets and Bank of America, you can compare the effects of market volatilities on Deutsche Real and Bank of America 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 Real with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Real and Bank of America.
Diversification Opportunities for Deutsche Real and Bank of America
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Deutsche and Bank is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Real Assets and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and Deutsche Real 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 Real Assets are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Deutsche Real i.e., Deutsche Real and Bank of America go up and down completely randomly.
Pair Corralation between Deutsche Real and Bank of America
Assuming the 90 days horizon Deutsche Real is expected to generate 6.6 times less return on investment than Bank of America. But when comparing it to its historical volatility, Deutsche Real Assets is 2.35 times less risky than Bank of America. It trades about 0.06 of its potential returns per unit of risk. Bank of America is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,320 in Bank of America on January 26, 2024 and sell it today you would earn a total of 512.00 from holding Bank of America or generate 15.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Deutsche Real Assets vs. Bank of America
Performance |
Timeline |
Deutsche Real Assets |
Bank of America |
Deutsche Real and Bank of America Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Deutsche Real and Bank of America
The main advantage of trading using opposite Deutsche Real and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Real position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.Deutsche Real vs. Deutsche Gnma Fund | Deutsche Real vs. Deutsche Short Term Municipal | Deutsche Real vs. Deutsche Short Term Municipal | Deutsche Real vs. Deutsche Science And |
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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