Correlation Between Erste Group and Remarul 16

Can any of the company-specific risk be diversified away by investing in both Erste Group and Remarul 16 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 Remarul 16 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 Remarul 16 Februarie, you can compare the effects of market volatilities on Erste Group and Remarul 16 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 Remarul 16. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and Remarul 16.

Diversification Opportunities for Erste Group and Remarul 16

-0.62

Correlation Coefficient

Erste Group  Remarul 16

Excellent diversification

The 3 months correlation between Erste and Remarul is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Remarul 16 Februarie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Remarul 16 Februarie 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 Remarul 16. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Remarul 16 Februarie has no effect on the direction of Erste Group i.e., Erste Group and Remarul 16 go up and down completely randomly.

Pair Corralation between Erste Group and Remarul 16

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.78 times more return on investment than Remarul 16. However, Erste Group Bank is 1.28 times less risky than Remarul 16. It trades about 0.38 of its potential returns per unit of risk. Remarul 16 Februarie is currently generating about -0.26 per unit of risk. If you would invest  27,120  in Erste Group Bank on October 9, 2024 and sell it today you would earn a total of  1,880  from holding Erste Group Bank or generate 6.93% 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.  Remarul 16 Februarie

Erste Group Bank

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Erste Group Bank has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Remarul 16 Februarie

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Remarul 16 Februarie has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Erste Group and Remarul 16

The main advantage of trading using opposite Erste Group and Remarul 16 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, Remarul 16 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 Remarul 16 will offset losses from the drop in Remarul 16's long position.

The idea behind Erste Group Bank and Remarul 16 Februarie 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.