Correlation Between Apple and Erste Group

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

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

Diversification Opportunities for Apple and Erste Group

0.86

Correlation Coefficient

Apple  Erste Group

Very poor diversification

The 3 months correlation between Apple and Erste is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and Erste Group go up and down completely randomly.

Pair Corralation between Apple and Erste Group

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.87 times more return on investment than Erste Group. However, Apple Inc is 1.15 times less risky than Erste Group. It trades about 0.4 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.23 per unit of risk. If you would invest  20,386  in Apple Inc on October 6, 2024 and sell it today you would earn a total of  3,169  from holding Apple Inc or generate 15.54% return on investment over 90 days.

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

Apple Inc  vs.  Erste Group Bank

Apple Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Erste Group Bank

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 19 (%) 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.

Pair Trading with Apple and Erste Group

The main advantage of trading using opposite Apple and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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.

Check out your portfolio center.

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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.