Correlation Between Budapest and Deutsche Bank
Can any of the company-specific risk be diversified away by investing in both Budapest 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 Budapest and Deutsche Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Budapest SE and Deutsche Bank AG, you can compare the effects of market volatilities on Budapest 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 Budapest with a short position of Deutsche Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Budapest and Deutsche Bank.
Diversification Opportunities for Budapest and Deutsche Bank
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Budapest and Deutsche is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Budapest SE 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 Budapest 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 Budapest SE 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 Budapest i.e., Budapest and Deutsche Bank go up and down completely randomly.
Pair Corralation between Budapest and Deutsche Bank
Assuming the 90 days trading horizon Budapest is expected to generate 3.3 times less return on investment than Deutsche Bank. But when comparing it to its historical volatility, Budapest SE is 1.26 times less risky than Deutsche Bank. It trades about 0.23 of its potential returns per unit of risk. Deutsche Bank AG is currently generating about 0.59 of returns per unit of risk over similar time horizon. If you would invest 654,400 in Deutsche Bank AG on September 14, 2024 and sell it today you would earn a total of 39,800 from holding Deutsche Bank AG or generate 6.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 40.91% |
| Values | Daily Returns |
Budapest SE vs. Deutsche Bank AG
Performance |
| Timeline |
Budapest and Deutsche Bank Volatility Contrast
Predicted Return Density |
| Returns |
Budapest SE
Pair trading matchups for Budapest
Deutsche Bank AG
Pair trading matchups for Deutsche Bank
Pair Trading with Budapest and Deutsche Bank
The main advantage of trading using opposite Budapest and Deutsche Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Budapest 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.| Budapest vs. NordTelekom Telecommunications Service | Budapest vs. Infineon Technologies AG | Budapest vs. Delta Technologies Nyrt |
| Deutsche Bank vs. Infineon Technologies AG | Deutsche Bank vs. NordTelekom Telecommunications Service | Deutsche Bank vs. OTP Bank Nyrt |
Check out your portfolio center.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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