Correlation Between Erste Group and Morningstar Unconstrained

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

Diversification Opportunities for Erste Group and Morningstar Unconstrained

0.25

Correlation Coefficient

Erste Group  Morningstar Unconstrained

Modest diversification

The 3 months correlation between Erste and Morningstar is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Morningstar Unconstrained Allo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Unconstrained 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 Morningstar Unconstrained. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Unconstrained has no effect on the direction of Erste Group i.e., Erste Group and Morningstar Unconstrained go up and down completely randomly.

Pair Corralation between Erste Group and Morningstar Unconstrained

Assuming the 90 days horizon Erste Group Bank is expected to generate 2.74 times more return on investment than Morningstar Unconstrained. However, Erste Group is 2.74 times more volatile than Morningstar Unconstrained Allocation. It trades about 0.14 of its potential returns per unit of risk. Morningstar Unconstrained Allocation is currently generating about 0.06 per unit of risk. If you would invest  2,641  in Erste Group Bank on September 16, 2024 and sell it today you would earn a total of  377.00  from holding Erste Group Bank or generate 14.27% return on investment over 90 days.

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

Erste Group Bank  vs.  Morningstar Unconstrained Allo

Erste Group Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Erste Group showed solid returns over the last few months and may actually be approaching a breakup point.

Morningstar Unconstrained

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar Unconstrained Allocation are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Morningstar Unconstrained is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Erste Group and Morningstar Unconstrained

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

The idea behind Erste Group Bank and Morningstar Unconstrained Allocation 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.