Correlation Between Bayerische Motoren and Deutsche Bank

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Can any of the company-specific risk be diversified away by investing in both Bayerische Motoren 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 Bayerische Motoren and Deutsche Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayerische Motoren Werke and Deutsche Bank Aktiengesellschaft, you can compare the effects of market volatilities on Bayerische Motoren 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 Bayerische Motoren with a short position of Deutsche Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayerische Motoren and Deutsche Bank.

Diversification Opportunities for Bayerische Motoren and Deutsche Bank

BayerischeDeutscheDiversified AwayBayerischeDeutscheDiversified Away100%
0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Bayerische and Deutsche is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bayerische Motoren Werke 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 Bayerische Motoren 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 Bayerische Motoren Werke 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 Bayerische Motoren i.e., Bayerische Motoren and Deutsche Bank go up and down completely randomly.

Pair Corralation between Bayerische Motoren and Deutsche Bank

Assuming the 90 days trading horizon Bayerische Motoren is expected to generate 1.67 times less return on investment than Deutsche Bank. But when comparing it to its historical volatility, Bayerische Motoren Werke is 4.41 times less risky than Deutsche Bank. It trades about 0.22 of its potential returns per unit of risk. Deutsche Bank Aktiengesellschaft is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  41,940  in Deutsche Bank Aktiengesellschaft on November 30, 2024 and sell it today you would earn a total of  1,862  from holding Deutsche Bank Aktiengesellschaft or generate 4.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

Bayerische Motoren Werke  vs.  Deutsche Bank Aktiengesellscha

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0510152025
JavaScript chart by amCharts 3.21.15BMWM5N DBN
       Timeline  
Bayerische Motoren Werke 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Bayerische Motoren Werke are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bayerische Motoren is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1,6101,6201,6301,6401,650
Deutsche Bank Aktien 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Deutsche Bank showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15JanFebFeb340360380400420440

Bayerische Motoren and Deutsche Bank Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.12-0.81-0.5-0.190.0050520.210.520.831.141.45 0.51.01.52.02.53.0
JavaScript chart by amCharts 3.21.15BMWM5N DBN
       Returns  

Pair Trading with Bayerische Motoren and Deutsche Bank

The main advantage of trading using opposite Bayerische Motoren and Deutsche Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayerische Motoren 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 Bayerische Motoren Werke 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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