Correlation Between Erste Group and Invesco Physical

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

Diversification Opportunities for Erste Group and Invesco Physical

0.15

Correlation Coefficient

Erste Group  Invesco Physical

Average diversification

The 3 months correlation between Erste and Invesco is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Invesco Physical Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Physical Silver 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 Invesco Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Physical Silver has no effect on the direction of Erste Group i.e., Erste Group and Invesco Physical go up and down completely randomly.

Pair Corralation between Erste Group and Invesco Physical

Assuming the 90 days trading horizon Erste Group is expected to generate 1.68 times less return on investment than Invesco Physical. But when comparing it to its historical volatility, Erste Group Bank is 1.68 times less risky than Invesco Physical. It trades about 0.09 of its potential returns per unit of risk. Invesco Physical Silver is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,669  in Invesco Physical Silver on September 3, 2024 and sell it today you would earn a total of  264.00  from holding Invesco Physical Silver or generate 9.89% return on investment over 90 days.

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

Erste Group Bank  vs.  Invesco Physical Silver

Erste Group Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Erste Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco Physical Silver

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Physical Silver are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invesco Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Erste Group and Invesco Physical

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

The idea behind Erste Group Bank and Invesco Physical Silver 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.