Correlation Between Erste Group and Ibstock PLC

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

Diversification Opportunities for Erste Group and Ibstock PLC

-0.83

Correlation Coefficient

Erste Group  Ibstock PLC

Pay attention - limited upside

The 3 months correlation between Erste and Ibstock is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Ibstock PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ibstock 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 Ibstock PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ibstock PLC has no effect on the direction of Erste Group i.e., Erste Group and Ibstock PLC go up and down completely randomly.

Pair Corralation between Erste Group and Ibstock PLC

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.66 times more return on investment than Ibstock PLC. However, Erste Group Bank is 1.52 times less risky than Ibstock PLC. It trades about 0.28 of its potential returns per unit of risk. Ibstock PLC is currently generating about -0.12 per unit of risk. If you would invest  4,941  in Erste Group Bank on October 22, 2024 and sell it today you would earn a total of  1,092  from holding Erste Group Bank or generate 22.1% return on investment over 90 days.

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

Erste Group Bank  vs.  Ibstock PLC

Erste Group Bank

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 21 (%) 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.

Ibstock PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ibstock PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Erste Group and Ibstock PLC

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

The idea behind Erste Group Bank and Ibstock 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.