Correlation Between Erste Group and ARISTOCRAT LEISURE

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

Diversification Opportunities for Erste Group and ARISTOCRAT LEISURE

0.76

Correlation Coefficient

Erste Group  ARISTOCRAT LEISURE

Poor diversification

The 3 months correlation between Erste and ARISTOCRAT is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of Erste Group i.e., Erste Group and ARISTOCRAT LEISURE go up and down completely randomly.

Pair Corralation between Erste Group and ARISTOCRAT LEISURE

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.24 times more return on investment than ARISTOCRAT LEISURE. However, Erste Group is 1.24 times more volatile than ARISTOCRAT LEISURE. It trades about 0.3 of its potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.16 per unit of risk. If you would invest  5,492  in Erste Group Bank on October 10, 2024 and sell it today you would earn a total of  364.00  from holding Erste Group Bank or generate 6.63% return on investment over 90 days.

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

Erste Group Bank  vs.  ARISTOCRAT LEISURE

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 fragile basic indicators, Erste Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

ARISTOCRAT LEISURE

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erste Group and ARISTOCRAT LEISURE

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

The idea behind Erste Group Bank and ARISTOCRAT LEISURE 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 Commodity Directory module to find actively traded commodities issued by global exchanges.