Correlation Between Deutsche Bank and Brookline Bancorp

Can any of the company-specific risk be diversified away by investing in both Deutsche Bank and Brookline 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 Brookline 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 Brookline Bancorp, you can compare the effects of market volatilities on Deutsche Bank and Brookline 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 Brookline Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Bank and Brookline Bancorp.

Diversification Opportunities for Deutsche Bank and Brookline Bancorp

-0.7

Correlation Coefficient

Deutsche Bank  Brookline Bancorp

Excellent diversification

The 3 months correlation between Deutsche and Brookline is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Bank AG and Brookline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookline 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 Brookline Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookline Bancorp has no effect on the direction of Deutsche Bank i.e., Deutsche Bank and Brookline Bancorp go up and down completely randomly.

Pair Corralation between Deutsche Bank and Brookline Bancorp

Allowing for the 90-day total investment horizon Deutsche Bank AG is expected to generate 0.88 times more return on investment than Brookline Bancorp. However, Deutsche Bank AG is 1.13 times less risky than Brookline Bancorp. It trades about 0.13 of its potential returns per unit of risk. Brookline Bancorp is currently generating about -0.1 per unit of risk. If you would invest  1,383  in Deutsche Bank AG on February 2, 2024 and sell it today you would earn a total of  236.00  from holding Deutsche Bank AG or generate 17.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Deutsche Bank AG  vs.  Brookline Bancorp

Deutsche Bank AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Deutsche Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Brookline Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookline Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Deutsche Bank and Brookline Bancorp

The main advantage of trading using opposite Deutsche Bank and Brookline Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Bank position performs unexpectedly, Brookline 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 Brookline Bancorp will offset losses from the drop in Brookline Bancorp's long position.

The idea behind Deutsche Bank AG and Brookline Bancorp 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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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.