Correlation Between Erste Group and Virtu Financial

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

Diversification Opportunities for Erste Group and Virtu Financial

-0.46

Correlation Coefficient

Erste Group  Virtu Financial

Very good diversification

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

Pair Corralation between Erste Group and Virtu Financial

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.07 times more return on investment than Virtu Financial. However, Erste Group is 1.07 times more volatile than Virtu Financial. It trades about 0.1 of its potential returns per unit of risk. Virtu Financial is currently generating about 0.02 per unit of risk. 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

Erste Group Bank  vs.  Virtu Financial

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.

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.

Pair Trading with Erste Group and Virtu Financial

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

The idea behind Erste Group Bank and Virtu Financial 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.