Correlation Between Deutsche Bank and 1st Source

Can any of the company-specific risk be diversified away by investing in both Deutsche Bank and 1st Source 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 1st Source 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 1st Source, you can compare the effects of market volatilities on Deutsche Bank and 1st Source 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 1st Source. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Bank and 1st Source.

Diversification Opportunities for Deutsche Bank and 1st Source

0.26

Correlation Coefficient

Deutsche Bank  1st Source

Modest diversification

The 3 months correlation between Deutsche and 1st is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and 1st Source in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Source 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 1st Source. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Source has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and 1st Source go up and down completely randomly.

Pair Corralation between Deutsche Bank and 1st Source

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 1.38 times more return on investment than 1st Source. However, Deutsche Bank is 1.38 times more volatile than 1st Source. It trades about 0.19 of its potential returns per unit of risk. 1st Source is currently generating about -0.02 per unit of risk. If you would invest  2,608  in Deutsche Bank AG on May 6, 2025 and sell it today you would earn a total of  645.00  from holding Deutsche Bank AG or generate 24.73% return on investment over 90 days.

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

Deutsche Bank AG  vs.  1st Source

Deutsche Bank AG

Risk-Adjusted Performance

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 fragile fundamental drivers, Deutsche Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

1st Source

Risk-Adjusted Performance

Very Weak

Over the last 90 days 1st Source has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, 1st Source is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Deutsche Bank and 1st Source

The main advantage of trading using opposite Deutsche Bank and 1st Source positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Bank position performs unexpectedly, 1st Source 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 1st Source will offset losses from the drop in 1st Source's long position.

The idea behind Deutsche Bank AG and 1st Source 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.