Correlation Between Eagle Bancorp and Deutsche Bank

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

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

Diversification Opportunities for Eagle Bancorp and Deutsche Bank

-0.65

Correlation Coefficient

Eagle Bancorp  Deutsche Bank

Excellent diversification

The 3 months correlation between Eagle and Deutsche is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and Deutsche Bank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Bank AG and Eagle Bancorp 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 Eagle Bancorp are associated (or correlated) with Deutsche Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Bank AG has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Deutsche Bank go up and down completely randomly.

Pair Corralation between Eagle Bancorp and Deutsche Bank

Given the investment horizon of 90 days Eagle Bancorp is expected to generate 4.08 times less return on investment than Deutsche Bank. In addition to that, Eagle Bancorp is 1.73 times more volatile than Deutsche Bank AG. It trades about 0.03 of its total potential returns per unit of risk. Deutsche Bank AG is currently generating about 0.25 per unit of volatility. If you would invest  1,527  in Deutsche Bank AG on January 25, 2024 and sell it today you would earn a total of  123.00  from holding Deutsche Bank AG or generate 8.06% return on investment over 90 days.

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

Eagle Bancorp  vs.  Deutsche Bank AG

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 unfluctuating 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.

Deutsche Bank AG

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 17 (%) 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.

Pair Trading with Eagle Bancorp and Deutsche Bank

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

The idea behind Eagle Bancorp and Deutsche Bank AG 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.