Correlation Between Deutsche Bank and Brookfield Asset

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

Diversification Opportunities for Deutsche Bank and Brookfield Asset

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Deutsche and Brookfield is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Brookfield Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Asset Man 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 Brookfield Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Asset Man has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Brookfield Asset go up and down completely randomly.

Pair Corralation between Deutsche Bank and Brookfield Asset

Allowing for the 90-day total investment horizon Deutsche Bank is expected to generate 2.86 times less return on investment than Brookfield Asset. In addition to that, Deutsche Bank is 1.27 times more volatile than Brookfield Asset Management. It trades about 0.06 of its total potential returns per unit of risk. Brookfield Asset Management is currently generating about 0.23 per unit of volatility. If you would invest  3,764  in Brookfield Asset Management on September 11, 2024 and sell it today you would earn a total of  1,961  from holding Brookfield Asset Management or generate 52.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Deutsche Bank AG  vs.  Brookfield Asset Management

 Performance 
       Timeline  
Deutsche Bank AG 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Deutsche Bank sustained solid returns over the last few months and may actually be approaching a breakup point.
Brookfield Asset Man 

Risk-Adjusted Performance

25 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Asset Management are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brookfield Asset displayed solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Bank and Brookfield Asset Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Deutsche Bank and Brookfield Asset

The main advantage of trading using opposite Deutsche Bank and Brookfield Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Bank position performs unexpectedly, Brookfield Asset 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 Brookfield Asset will offset losses from the drop in Brookfield Asset's long position.
The idea behind Deutsche Bank AG and Brookfield Asset Management 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.
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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