Correlation Between Deutsche Bank and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Deutsche Bank and Ally Financial 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 Ally Financial 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 Ally Financial, you can compare the effects of market volatilities on Deutsche Bank and Ally Financial 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 Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Bank and Ally Financial.
Diversification Opportunities for Deutsche Bank and Ally Financial
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Deutsche and Ally is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial 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 Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Ally Financial go up and down completely randomly.
Pair Corralation between Deutsche Bank and Ally Financial
Allowing for the 90-day total investment horizon Deutsche Bank is expected to generate 1.05 times less return on investment than Ally Financial. But when comparing it to its historical volatility, Deutsche Bank AG is 1.19 times less risky than Ally Financial. It trades about 0.07 of its potential returns per unit of risk. Ally Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,833 in Ally Financial on August 26, 2024 and sell it today you would earn a total of 952.00 from holding Ally Financial or generate 33.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deutsche Bank AG vs. Ally Financial
Performance |
| Timeline |
| Deutsche Bank AG |
| Ally Financial |
Deutsche Bank and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deutsche Bank and Ally Financial
The main advantage of trading using opposite Deutsche Bank and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Bank position performs unexpectedly, Ally Financial 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 Ally Financial will offset losses from the drop in Ally Financial's long position.| Deutsche Bank vs. Banco Bradesco SA | Deutsche Bank vs. Itau Unibanco Banco | Deutsche Bank vs. Banco Santander Brasil | Deutsche Bank vs. Western Alliance Bancorporation |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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