Correlation Between Deutsche Bank and Canadian Imperial

Can any of the company-specific risk be diversified away by investing in both Deutsche Bank and Canadian Imperial 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 Canadian Imperial 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 Canadian Imperial Bank, you can compare the effects of market volatilities on Deutsche Bank and Canadian Imperial 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 Canadian Imperial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Bank and Canadian Imperial.

Diversification Opportunities for Deutsche Bank and Canadian Imperial

0.86

Correlation Coefficient

Deutsche Bank  Canadian Imperial

Very poor diversification

The 3 months correlation between Deutsche and Canadian is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Canadian Imperial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Imperial Bank 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 Canadian Imperial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Imperial Bank has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Canadian Imperial go up and down completely randomly.

Pair Corralation between Deutsche Bank and Canadian Imperial

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 1.28 times more return on investment than Canadian Imperial. However, Deutsche Bank is 1.28 times more volatile than Canadian Imperial Bank. It trades about 0.19 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.13 per unit of risk. If you would invest  1,060  in Deutsche Bank AG on January 24, 2024 and sell it today you would earn a total of  564.00  from holding Deutsche Bank AG or generate 53.21% return on investment over 90 days.

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

Deutsche Bank AG  vs.  Canadian Imperial Bank

Deutsche Bank AG

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Deutsche Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Canadian Imperial Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Canadian Imperial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Deutsche Bank and Canadian Imperial

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

The idea behind Deutsche Bank AG and Canadian Imperial Bank 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.