Correlation Between Deutsche Small and Deutsche Enhanced
Can any of the company-specific risk be diversified away by investing in both Deutsche Small and Deutsche Enhanced 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 Small and Deutsche Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deutsche Small Cap and Deutsche Enhanced Emerging, you can compare the effects of market volatilities on Deutsche Small and Deutsche Enhanced 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 Small with a short position of Deutsche Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Small and Deutsche Enhanced.
Diversification Opportunities for Deutsche Small and Deutsche Enhanced
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Deutsche and Deutsche is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Small Cap and Deutsche Enhanced Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Enhanced and Deutsche Small 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 Small Cap are associated (or correlated) with Deutsche Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Enhanced has no effect on the direction of Deutsche Small i.e., Deutsche Small and Deutsche Enhanced go up and down completely randomly.
Pair Corralation between Deutsche Small and Deutsche Enhanced
Assuming the 90 days horizon Deutsche Small Cap is expected to generate 4.77 times more return on investment than Deutsche Enhanced. However, Deutsche Small is 4.77 times more volatile than Deutsche Enhanced Emerging. It trades about 0.21 of its potential returns per unit of risk. Deutsche Enhanced Emerging is currently generating about 0.04 per unit of risk. If you would invest 3,642 in Deutsche Small Cap on August 28, 2024 and sell it today you would earn a total of 225.00 from holding Deutsche Small Cap or generate 6.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deutsche Small Cap vs. Deutsche Enhanced Emerging
Performance |
| Timeline |
| Deutsche Small Cap |
| Deutsche Enhanced |
Deutsche Small and Deutsche Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deutsche Small and Deutsche Enhanced
The main advantage of trading using opposite Deutsche Small and Deutsche Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Small position performs unexpectedly, Deutsche Enhanced 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 Enhanced will offset losses from the drop in Deutsche Enhanced's long position.| Deutsche Small vs. Deutsche Gnma Fund | Deutsche Small vs. Deutsche Short Term Municipal | Deutsche Small vs. Deutsche Short Term Municipal | Deutsche Small vs. Deutsche Science And |
| Deutsche Enhanced vs. Deutsche Gnma Fund | Deutsche Enhanced vs. Deutsche Short Term Municipal | Deutsche Enhanced vs. Deutsche Short Term Municipal | Deutsche Enhanced vs. Deutsche Science And |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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