Correlation Between Deutsche Bank and Enterprise Financial

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

Diversification Opportunities for Deutsche Bank and Enterprise Financial

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Deutsche and Enterprise is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Enterprise Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Financial 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 Enterprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Financial has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Enterprise Financial go up and down completely randomly.

Pair Corralation between Deutsche Bank and Enterprise Financial

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 0.91 times more return on investment than Enterprise Financial. However, Deutsche Bank AG is 1.09 times less risky than Enterprise Financial. It trades about 0.54 of its potential returns per unit of risk. Enterprise Financial Services is currently generating about 0.1 per unit of risk. If you would invest  1,338  in Deutsche Bank AG on December 30, 2023 and sell it today you would earn a total of  239.00  from holding Deutsche Bank AG or generate 17.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Deutsche Bank AG  vs.  Enterprise Financial Services

 Performance 
       Timeline  
Deutsche Bank AG 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Deutsche Bank sustained solid returns over the last few months and may actually be approaching a breakup point.
Enterprise Financial 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Enterprise Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Deutsche Bank and Enterprise Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Deutsche Bank and Enterprise Financial

The main advantage of trading using opposite Deutsche Bank and Enterprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Bank position performs unexpectedly, Enterprise Financial 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 Enterprise Financial will offset losses from the drop in Enterprise Financial's long position.
The idea behind Deutsche Bank AG and Enterprise Financial Services 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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