Correlation Between Deutsche Bank and Credit Acceptance

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

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

Diversification Opportunities for Deutsche Bank and Credit Acceptance

-0.73

Correlation Coefficient

Deutsche Bank  Credit Acceptance

Pay attention - limited upside

The 3 months correlation between Deutsche and Credit is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance 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 AG are associated (or correlated) with Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Credit Acceptance go up and down completely randomly.

Pair Corralation between Deutsche Bank and Credit Acceptance

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 0.91 times more return on investment than Credit Acceptance. However, Deutsche Bank AG is 1.1 times less risky than Credit Acceptance. It trades about 0.11 of its potential returns per unit of risk. Credit Acceptance is currently generating about 0.0 per unit of risk. If you would invest  991.00  in Deutsche Bank AG on March 16, 2024 and sell it today you would earn a total of  579.00  from holding Deutsche Bank AG or generate 58.43% return on investment over 90 days.

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

Deutsche Bank AG  vs.  Credit Acceptance

Deutsche Bank AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Deutsche Bank may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Credit Acceptance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credit Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Deutsche Bank and Credit Acceptance

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

The idea behind Deutsche Bank AG and Credit Acceptance 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.