Correlation Between Virtu Financial and Erste Group

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

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

Diversification Opportunities for Virtu Financial and Erste Group

-0.46

Correlation Coefficient

Virtu Financial  Erste Group

Very good diversification

The 3 months correlation between Virtu and Erste is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Virtu Financial and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank and Virtu Financial 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 Virtu Financial are associated (or correlated) with Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Virtu Financial i.e., Virtu Financial and Erste Group go up and down completely randomly.

Pair Corralation between Virtu Financial and Erste Group

Assuming the 90 days horizon Virtu Financial is expected to generate 7.17 times less return on investment than Erste Group. But when comparing it to its historical volatility, Virtu Financial is 1.07 times less risky than Erste Group. It trades about 0.02 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,948  in Erste Group Bank on December 22, 2024 and sell it today you would earn a total of  796.00  from holding Erste Group Bank or generate 13.38% return on investment over 90 days.

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

Virtu Financial  vs.  Erste Group Bank

Virtu Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Virtu Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Virtu Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Erste Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Virtu Financial and Erste Group

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

The idea behind Virtu Financial and Erste Group Bank 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.