Correlation Between Erste Group and PG E

Can any of the company-specific risk be diversified away by investing in both Erste Group and PG E 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 PG E 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 PG E P6, you can compare the effects of market volatilities on Erste Group and PG E 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 PG E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and PG E.

Diversification Opportunities for Erste Group and PG E

0.57

Correlation Coefficient

Erste Group  PG E

Very weak diversification

The 3 months correlation between Erste and PCG6 is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and PG E P6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PG E P6 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 PG E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PG E P6 has no effect on the direction of Erste Group i.e., Erste Group and PG E go up and down completely randomly.

Pair Corralation between Erste Group and PG E

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.03 times more return on investment than PG E. However, Erste Group is 1.03 times more volatile than PG E P6. It trades about 0.1 of its potential returns per unit of risk. PG E P6 is currently generating about 0.05 per unit of risk. If you would invest  2,889  in Erste Group Bank on October 4, 2024 and sell it today you would earn a total of  3,019  from holding Erste Group Bank or generate 104.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.6%
Values	Daily Returns

Erste Group Bank  vs.  PG E P6

Erste Group Bank

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 21 (%) 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.

PG E P6

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PG E P6 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, PG E 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 PG E

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

The idea behind Erste Group Bank and PG E P6 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.