Correlation Between Erste Group and CleanTech Lithium

Can any of the company-specific risk be diversified away by investing in both Erste Group and CleanTech Lithium 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 Erste Group and CleanTech Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Erste Group Bank and CleanTech Lithium plc, you can compare the effects of market volatilities on Erste Group and CleanTech Lithium 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 Erste Group with a short position of CleanTech Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and CleanTech Lithium.

Diversification Opportunities for Erste Group and CleanTech Lithium

-0.77

Correlation Coefficient

Erste Group  CleanTech Lithium

Pay attention - limited upside

The 3 months correlation between Erste and CleanTech is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and CleanTech Lithium plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CleanTech Lithium plc and Erste Group 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 Erste Group Bank are associated (or correlated) with CleanTech Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CleanTech Lithium plc has no effect on the direction of Erste Group i.e., Erste Group and CleanTech Lithium go up and down completely randomly.

Pair Corralation between Erste Group and CleanTech Lithium

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.26 times more return on investment than CleanTech Lithium. However, Erste Group Bank is 3.81 times less risky than CleanTech Lithium. It trades about 0.25 of its potential returns per unit of risk. CleanTech Lithium plc is currently generating about -0.03 per unit of risk. If you would invest  5,884  in Erste Group Bank on October 25, 2024 and sell it today you would earn a total of  306.00  from holding Erste Group Bank or generate 5.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Erste Group Bank  vs.  CleanTech Lithium plc

Erste Group Bank

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Erste Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

CleanTech Lithium plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CleanTech Lithium plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Erste Group and CleanTech Lithium

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

The idea behind Erste Group Bank and CleanTech Lithium plc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.