Correlation Between Erste Group and Investment Company

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

Diversification Opportunities for Erste Group and Investment Company

-0.75

Correlation Coefficient

Erste Group  Investment Company

Pay attention - limited upside

The 3 months correlation between Erste and Investment is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and The Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Company 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 Investment Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Company has no effect on the direction of Erste Group i.e., Erste Group and Investment Company go up and down completely randomly.

Pair Corralation between Erste Group and Investment Company

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 2.82 times more return on investment than Investment Company. However, Erste Group is 2.82 times more volatile than The Investment. It trades about 0.12 of its potential returns per unit of risk. The Investment is currently generating about -0.29 per unit of risk. If you would invest  5,905  in Erste Group Bank on December 25, 2024 and sell it today you would earn a total of  977.00  from holding Erste Group Bank or generate 16.55% return on investment over 90 days.

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

Erste Group Bank  vs.  The Investment

Erste Group Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 9 (%) 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.

Investment Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Investment 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Erste Group and Investment Company

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

The idea behind Erste Group Bank and The Investment 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.