Correlation Between China Coal and Deutsche Bank

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

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

Diversification Opportunities for China Coal and Deutsche Bank

0.37

Correlation Coefficient

China Coal  Deutsche Bank

Weak diversification

The 3 months correlation between China and Deutsche is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding China Coal Energy and Deutsche Bank Aktiengesellscha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Bank Aktien and China Coal 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 China Coal Energy 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 Aktien has no effect on the direction of China Coal i.e., China Coal and Deutsche Bank go up and down completely randomly.

Pair Corralation between China Coal and Deutsche Bank

Assuming the 90 days horizon China Coal is expected to generate 2.61 times less return on investment than Deutsche Bank. In addition to that, China Coal is 2.22 times more volatile than Deutsche Bank Aktiengesellschaft. It trades about 0.01 of its total potential returns per unit of risk. Deutsche Bank Aktiengesellschaft is currently generating about 0.06 per unit of volatility. If you would invest  1,549  in Deutsche Bank Aktiengesellschaft on September 26, 2024 and sell it today you would earn a total of  82.00  from holding Deutsche Bank Aktiengesellschaft or generate 5.29% return on investment over 90 days.

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

China Coal Energy  vs.  Deutsche Bank Aktiengesellscha

China Coal Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Coal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Coal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Deutsche Bank Aktien

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, Deutsche Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with China Coal and Deutsche Bank

The main advantage of trading using opposite China Coal and Deutsche Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Coal 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 China Coal Energy and Deutsche Bank Aktiengesellschaft 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.