Correlation Between Deutsche Bank and Eagle Bancorp

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

Diversification Opportunities for Deutsche Bank and Eagle Bancorp

-0.68

Correlation Coefficient

Deutsche Bank  Eagle Bancorp

Excellent diversification

The 3 months correlation between Deutsche and Eagle is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Eagle Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp 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 Eagle Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Bancorp has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Eagle Bancorp go up and down completely randomly.

Pair Corralation between Deutsche Bank and Eagle Bancorp

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 0.55 times more return on investment than Eagle Bancorp. However, Deutsche Bank AG is 1.81 times less risky than Eagle Bancorp. It trades about 0.2 of its potential returns per unit of risk. Eagle Bancorp is currently generating about -0.02 per unit of risk. If you would invest  1,499  in Deutsche Bank AG on January 20, 2024 and sell it today you would earn a total of  92.00  from holding Deutsche Bank AG or generate 6.14% 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.  Eagle Bancorp

Deutsche Bank AG

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 15 (%) 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.

Eagle Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Bancorp 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 drivers remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Deutsche Bank and Eagle Bancorp

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

The idea behind Deutsche Bank AG and Eagle Bancorp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.