Can any of the company-specific risk be diversified away by investing in both Lyxor 1 and Deutsche Bank 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 Lyxor 1 and Deutsche Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor 1 and Deutsche Bank Aktiengesellschaft, you can compare the effects of market volatilities on Lyxor 1 and Deutsche Bank 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 Lyxor 1 with a short position of Deutsche Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and Deutsche Bank.
Diversification Opportunities for Lyxor 1 and Deutsche Bank
The 3 months correlation between Lyxor and Deutsche is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Deutsche Bank Aktiengesellscha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Bank Aktien and Lyxor 1 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 Lyxor 1 are associated (or correlated) with Deutsche Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Bank Aktien has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Deutsche Bank go up and down completely randomly.
Pair Corralation between Lyxor 1 and Deutsche Bank
Assuming the 90 days trading horizon Lyxor 1 is expected to generate 4.33 times less return on investment than Deutsche Bank. But when comparing it to its historical volatility, Lyxor 1 is 1.8 times less risky than Deutsche Bank. It trades about 0.03 of its potential returns per unit of risk. Deutsche Bank Aktiengesellschaft is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 894.00 in Deutsche Bank Aktiengesellschaft on March 6, 2024 and sell it today you would earn a total of 633.00 from holding Deutsche Bank Aktiengesellschaft or generate 70.81% return on investment over 90 days.
Over the last 90 days Lyxor 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Bank Aktiengesellschaft are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward-looking signals, Deutsche Bank displayed solid returns over the last few months and may actually be approaching a breakup point.