Correlation Between Deutsche Bank and Eaton Plc
Can any of the company-specific risk be diversified away by investing in both Deutsche Bank and Eaton Plc 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 Eaton Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deutsche Bank Aktiengesellschaft and Eaton plc, you can compare the effects of market volatilities on Deutsche Bank and Eaton Plc 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 Eaton Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Bank and Eaton Plc.
Diversification Opportunities for Deutsche Bank and Eaton Plc
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Deutsche and Eaton is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank Aktiengesellscha and Eaton plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton plc 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 Aktiengesellschaft are associated (or correlated) with Eaton Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton plc has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Eaton Plc go up and down completely randomly.
Pair Corralation between Deutsche Bank and Eaton Plc
Assuming the 90 days trading horizon Deutsche Bank is expected to generate 1.21 times less return on investment than Eaton Plc. In addition to that, Deutsche Bank is 1.1 times more volatile than Eaton plc. It trades about 0.13 of its total potential returns per unit of risk. Eaton plc is currently generating about 0.17 per unit of volatility. If you would invest 7,877 in Eaton plc on September 2, 2024 and sell it today you would earn a total of 8,223 from holding Eaton plc or generate 104.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 89.6% |
| Values | Daily Returns |
Deutsche Bank Aktiengesellscha vs. Eaton plc
Performance |
| Timeline |
| Deutsche Bank Aktien |
| Eaton plc |
Deutsche Bank and Eaton Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deutsche Bank and Eaton Plc
The main advantage of trading using opposite Deutsche Bank and Eaton Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Bank position performs unexpectedly, Eaton Plc 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 Eaton Plc will offset losses from the drop in Eaton Plc's long position.| Deutsche Bank vs. Ita Unibanco Holding | Deutsche Bank vs. Banco Santander SA | Deutsche Bank vs. Itasa Investimentos |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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