Correlation Between Deutsche Bank and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Deutsche Bank and Merchants Bancorp 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 Merchants Bancorp 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 Merchants Bancorp, you can compare the effects of market volatilities on Deutsche Bank and Merchants Bancorp 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 Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Bank and Merchants Bancorp.
Diversification Opportunities for Deutsche Bank and Merchants Bancorp
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Deutsche and Merchants is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Deutsche Bank and Merchants Bancorp
Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 1.36 times more return on investment than Merchants Bancorp. However, Deutsche Bank is 1.36 times more volatile than Merchants Bancorp. It trades about 0.08 of its potential returns per unit of risk. Merchants Bancorp is currently generating about 0.06 per unit of risk. If you would invest 1,038 in Deutsche Bank AG on August 31, 2024 and sell it today you would earn a total of 663.00 from holding Deutsche Bank AG or generate 63.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Deutsche Bank AG vs. Merchants Bancorp
Performance |
| Timeline |
| Deutsche Bank AG |
| Merchants Bancorp |
Deutsche Bank and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deutsche Bank and Merchants Bancorp
The main advantage of trading using opposite Deutsche Bank and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Bank position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp's long position.| Deutsche Bank vs. Banco Bradesco SA | Deutsche Bank vs. Itau Unibanco Banco | Deutsche Bank vs. Lloyds Banking Group | Deutsche Bank vs. Banco Santander Brasil |
| Merchants Bancorp vs. KeyCorp | Merchants Bancorp vs. KeyCorp | Merchants Bancorp vs. Fifth Third Bancorp | Merchants Bancorp vs. Citizens Financial Group |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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