Correlation Between Alumil Rom and Erste Group

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

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

Diversification Opportunities for Alumil Rom and Erste Group

-0.53

Correlation Coefficient

Alumil Rom  Erste Group

Excellent diversification

The 3 months correlation between Alumil and Erste is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alumil Rom Industry 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 Alumil Rom 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 Alumil Rom Industry 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 Alumil Rom i.e., Alumil Rom and Erste Group go up and down completely randomly.

Pair Corralation between Alumil Rom and Erste Group

Assuming the 90 days trading horizon Alumil Rom Industry is expected to under-perform the Erste Group. In addition to that, Alumil Rom is 2.89 times more volatile than Erste Group Bank. It trades about -0.03 of its total potential returns per unit of risk. Erste Group Bank is currently generating about 0.11 per unit of volatility. If you would invest  26,680  in Erste Group Bank on September 12, 2024 and sell it today you would earn a total of  770.00  from holding Erste Group Bank or generate 2.89% return on investment over 90 days.

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

Alumil Rom Industry  vs.  Erste Group Bank

Alumil Rom Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumil Rom Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alumil Rom is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Erste Group Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Erste Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alumil Rom and Erste Group

The main advantage of trading using opposite Alumil Rom and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alumil Rom 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 Alumil Rom Industry 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.