Correlation Between Deutsche Bank and Mastercard

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

Diversification Opportunities for Deutsche Bank and Mastercard

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Deutsche and Mastercard is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Mastercard go up and down completely randomly.

Pair Corralation between Deutsche Bank and Mastercard

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 1.66 times more return on investment than Mastercard. However, Deutsche Bank is 1.66 times more volatile than Mastercard. It trades about 0.21 of its potential returns per unit of risk. Mastercard is currently generating about -0.21 per unit of risk. If you would invest  1,463  in Deutsche Bank AG on January 17, 2024 and sell it today you would earn a total of  88.00  from holding Deutsche Bank AG or generate 6.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Deutsche Bank AG  vs.  Mastercard

 Performance 
       Timeline  
Deutsche Bank AG 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
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.
Mastercard 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Deutsche Bank and Mastercard Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Deutsche Bank and Mastercard

The main advantage of trading using opposite Deutsche Bank and Mastercard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Bank position performs unexpectedly, Mastercard 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 Mastercard will offset losses from the drop in Mastercard's long position.
The idea behind Deutsche Bank AG and Mastercard 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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