Correlation Between Sp 500 and Deutsche Equity
Can any of the company-specific risk be diversified away by investing in both Sp 500 and Deutsche Equity 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 Sp 500 and Deutsche Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp 500 Index and Deutsche Equity 500, you can compare the effects of market volatilities on Sp 500 and Deutsche Equity 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 Sp 500 with a short position of Deutsche Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Deutsche Equity.
Diversification Opportunities for Sp 500 and Deutsche Equity
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPFIX and Deutsche is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Index and Deutsche Equity 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Equity 500 and Sp 500 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 Sp 500 Index are associated (or correlated) with Deutsche Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Equity 500 has no effect on the direction of Sp 500 i.e., Sp 500 and Deutsche Equity go up and down completely randomly.
Pair Corralation between Sp 500 and Deutsche Equity
Assuming the 90 days horizon Sp 500 Index is expected to under-perform the Deutsche Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sp 500 Index is 1.0 times less risky than Deutsche Equity. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Deutsche Equity 500 is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 15,504 in Deutsche Equity 500 on November 27, 2024 and sell it today you would lose (61.00) from holding Deutsche Equity 500 or give up 0.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp 500 Index vs. Deutsche Equity 500
Performance |
| Timeline |
| Sp 500 Index |
| Deutsche Equity 500 |
Sp 500 and Deutsche Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp 500 and Deutsche Equity
The main advantage of trading using opposite Sp 500 and Deutsche Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Deutsche Equity 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 Deutsche Equity will offset losses from the drop in Deutsche Equity's long position.| Sp 500 vs. Sp Midcap Index | Sp 500 vs. Sp Smallcap Index | Sp 500 vs. Deutsche Equity 500 | Sp 500 vs. Dreyfus Institutional Sp |
| Deutsche Equity vs. Sp 500 Index | Deutsche Equity vs. Dreyfus Institutional Sp | Deutsche Equity vs. Deutsche Equity 500 | Deutsche Equity vs. Deutsche Sp 500 |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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