Correlation Between Erste Group and Infinity Capital

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

Diversification Opportunities for Erste Group and Infinity Capital

0.53

Correlation Coefficient

Erste Group  Infinity Capital

Very weak diversification

The 3 months correlation between Erste and Infinity is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Infinity Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinity Capital Inv 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 Infinity Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinity Capital Inv has no effect on the direction of Erste Group i.e., Erste Group and Infinity Capital go up and down completely randomly.

Pair Corralation between Erste Group and Infinity Capital

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.82 times more return on investment than Infinity Capital. However, Erste Group Bank is 1.23 times less risky than Infinity Capital. It trades about 0.24 of its potential returns per unit of risk. Infinity Capital Investments is currently generating about 0.12 per unit of risk. If you would invest  23,920  in Erste Group Bank on September 13, 2024 and sell it today you would earn a total of  4,560  from holding Erste Group Bank or generate 19.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Erste Group Bank  vs.  Infinity Capital Investments

Erste Group Bank

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Erste Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Infinity Capital Inv

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Infinity Capital Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Infinity Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Erste Group and Infinity Capital

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

The idea behind Erste Group Bank and Infinity Capital Investments 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.