Correlation Between Deutsche Enhanced and New World
Can any of the company-specific risk be diversified away by investing in both Deutsche Enhanced and New World 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 Enhanced and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deutsche Enhanced Modity and New World Fund, you can compare the effects of market volatilities on Deutsche Enhanced and New World 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 Enhanced with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Enhanced and New World.
Diversification Opportunities for Deutsche Enhanced and New World
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Deutsche and New is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Enhanced Modity and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund and Deutsche Enhanced 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 Enhanced Modity are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Deutsche Enhanced i.e., Deutsche Enhanced and New World go up and down completely randomly.
Pair Corralation between Deutsche Enhanced and New World
Assuming the 90 days horizon Deutsche Enhanced Modity is expected to generate 1.15 times more return on investment than New World. However, Deutsche Enhanced is 1.15 times more volatile than New World Fund. It trades about -0.05 of its potential returns per unit of risk. New World Fund is currently generating about -0.17 per unit of risk. If you would invest 499.00 in Deutsche Enhanced Modity on September 3, 2024 and sell it today you would lose (4.00) from holding Deutsche Enhanced Modity or give up 0.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deutsche Enhanced Modity vs. New World Fund
Performance |
| Timeline |
| Deutsche Enhanced Modity |
| New World Fund |
Deutsche Enhanced and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deutsche Enhanced and New World
The main advantage of trading using opposite Deutsche Enhanced and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Enhanced position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.The idea behind Deutsche Enhanced Modity and New World Fund 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.
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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