Correlation Between Banco Bilbao and Deutsche Real

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

By analyzing existing cross correlation between Banco Bilbao Viscaya and Deutsche Real Assets, you can compare the effects of market volatilities on Banco Bilbao and Deutsche Real 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 Banco Bilbao with a short position of Deutsche Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bilbao and Deutsche Real.

Diversification Opportunities for Banco Bilbao and Deutsche Real

0.85

Correlation Coefficient

Banco Bilbao  Deutsche Real

Very poor diversification

The 3 months correlation between Banco and Deutsche is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Viscaya and Deutsche Real Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Real Assets and Banco Bilbao 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 Banco Bilbao Viscaya are associated (or correlated) with Deutsche Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Real Assets has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and Deutsche Real go up and down completely randomly.

Pair Corralation between Banco Bilbao and Deutsche Real

Given the investment horizon of 90 days Banco Bilbao Viscaya is expected to generate 2.54 times more return on investment than Deutsche Real. However, Banco Bilbao is 2.54 times more volatile than Deutsche Real Assets. It trades about 0.02 of its potential returns per unit of risk. Deutsche Real Assets is currently generating about -0.06 per unit of risk. If you would invest  1,124  in Banco Bilbao Viscaya on January 25, 2024 and sell it today you would earn a total of  3.00  from holding Banco Bilbao Viscaya or generate 0.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Banco Bilbao Viscaya  vs.  Deutsche Real Assets

Banco Bilbao Viscaya

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Viscaya are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Banco Bilbao sustained solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Real Assets

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Real Assets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Deutsche Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco Bilbao and Deutsche Real

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

The idea behind Banco Bilbao Viscaya and Deutsche Real Assets 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.