Correlation Between Erste Group and First Bankers

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

Diversification Opportunities for Erste Group and First Bankers

0.61

Correlation Coefficient

Erste Group  First Bankers

Poor diversification

The 3 months correlation between Erste and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and First Bankers Trustshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bankers Trustshares 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 First Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bankers Trustshares has no effect on the direction of Erste Group i.e., Erste Group and First Bankers go up and down completely randomly.

Pair Corralation between Erste Group and First Bankers

Assuming the 90 days horizon Erste Group Bank is expected to generate 0.92 times more return on investment than First Bankers. However, Erste Group Bank is 1.09 times less risky than First Bankers. It trades about 0.11 of its potential returns per unit of risk. First Bankers Trustshares is currently generating about 0.04 per unit of risk. If you would invest  3,350  in Erste Group Bank on October 5, 2024 and sell it today you would earn a total of  2,610  from holding Erste Group Bank or generate 77.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.12%
Values	Daily Returns

Erste Group Bank  vs.  First Bankers Trustshares

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. Despite nearly weak basic indicators, Erste Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

First Bankers Trustshares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Bankers Trustshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First Bankers is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Erste Group and First Bankers

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

The idea behind Erste Group Bank and First Bankers Trustshares 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.