Correlation Between Erste Group and GRUPUL INDUSTRIAL

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

Diversification Opportunities for Erste Group and GRUPUL INDUSTRIAL

0.6

Correlation Coefficient

Erste Group  GRUPUL INDUSTRIAL

Poor diversification

The 3 months correlation between Erste and GRUPUL is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and GRUPUL INDUSTRIAL ELECTROCONTA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRUPUL INDUSTRIAL 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 GRUPUL INDUSTRIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRUPUL INDUSTRIAL has no effect on the direction of Erste Group i.e., Erste Group and GRUPUL INDUSTRIAL go up and down completely randomly.

Pair Corralation between Erste Group and GRUPUL INDUSTRIAL

Assuming the 90 days trading horizon Erste Group is expected to generate 2.48 times less return on investment than GRUPUL INDUSTRIAL. But when comparing it to its historical volatility, Erste Group Bank is 2.84 times less risky than GRUPUL INDUSTRIAL. It trades about 0.1 of its potential returns per unit of risk. GRUPUL INDUSTRIAL ELECTROCONTACT is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4.45  in GRUPUL INDUSTRIAL ELECTROCONTACT on December 30, 2024 and sell it today you would earn a total of  0.95  from holding GRUPUL INDUSTRIAL ELECTROCONTACT or generate 21.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Erste Group Bank  vs.  GRUPUL INDUSTRIAL ELECTROCONTA

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

GRUPUL INDUSTRIAL

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GRUPUL INDUSTRIAL ELECTROCONTACT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, GRUPUL INDUSTRIAL displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erste Group and GRUPUL INDUSTRIAL

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

The idea behind Erste Group Bank and GRUPUL INDUSTRIAL ELECTROCONTACT 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.