Correlation Between Erste Group and BROADWIND ENRGY

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

Diversification Opportunities for Erste Group and BROADWIND ENRGY

-0.75

Correlation Coefficient

Erste Group  BROADWIND ENRGY

Pay attention - limited upside

The 3 months correlation between Erste and BROADWIND is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and BROADWIND ENRGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROADWIND ENRGY 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 BROADWIND ENRGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROADWIND ENRGY has no effect on the direction of Erste Group i.e., Erste Group and BROADWIND ENRGY go up and down completely randomly.

Pair Corralation between Erste Group and BROADWIND ENRGY

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.67 times more return on investment than BROADWIND ENRGY. However, Erste Group Bank is 1.49 times less risky than BROADWIND ENRGY. It trades about 0.12 of its potential returns per unit of risk. BROADWIND ENRGY is currently generating about -0.13 per unit of risk. If you would invest  5,908  in Erste Group Bank on December 25, 2024 and sell it today you would earn a total of  986.00  from holding Erste Group Bank or generate 16.69% return on investment over 90 days.

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

Erste Group Bank  vs.  BROADWIND ENRGY

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 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Erste Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

BROADWIND ENRGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days BROADWIND ENRGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Erste Group and BROADWIND ENRGY

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

The idea behind Erste Group Bank and BROADWIND ENRGY 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.