Correlation Between Erste Group and AMAG Austria

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

Diversification Opportunities for Erste Group and AMAG Austria

-0.06

Correlation Coefficient

Erste Group  AMAG Austria

Good diversification

The 3 months correlation between Erste and AMAG is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and AMAG Austria Metall in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMAG Austria Metall 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 AMAG Austria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMAG Austria Metall has no effect on the direction of Erste Group i.e., Erste Group and AMAG Austria go up and down completely randomly.

Pair Corralation between Erste Group and AMAG Austria

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.14 times more return on investment than AMAG Austria. However, Erste Group is 1.14 times more volatile than AMAG Austria Metall. It trades about 0.12 of its potential returns per unit of risk. AMAG Austria Metall is currently generating about 0.01 per unit of risk. If you would invest  4,851  in Erste Group Bank on September 5, 2024 and sell it today you would earn a total of  485.00  from holding Erste Group Bank or generate 10.0% return on investment over 90 days.

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

Erste Group Bank  vs.  AMAG Austria Metall

Erste Group Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Erste Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AMAG Austria Metall

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMAG Austria Metall has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, AMAG Austria is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Erste Group and AMAG Austria

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

The idea behind Erste Group Bank and AMAG Austria Metall 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.