Correlation Between Erste Group and BKS Bank

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

Diversification Opportunities for Erste Group and BKS Bank

0.56

Correlation Coefficient

Erste Group  BKS Bank

Very weak diversification

The 3 months correlation between Erste and BKS is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and BKS Bank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKS Bank AG 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 BKS Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKS Bank AG has no effect on the direction of Erste Group i.e., Erste Group and BKS Bank go up and down completely randomly.

Pair Corralation between Erste Group and BKS Bank

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 2.3 times more return on investment than BKS Bank. However, Erste Group is 2.3 times more volatile than BKS Bank AG. It trades about 0.07 of its potential returns per unit of risk. BKS Bank AG is currently generating about 0.02 per unit of risk. If you would invest  5,966  in Erste Group Bank on December 28, 2024 and sell it today you would earn a total of  572.00  from holding Erste Group Bank or generate 9.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Erste Group Bank  vs.  BKS Bank AG

Erste Group Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 5 (%) 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 April 2025.

BKS Bank AG

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BKS Bank AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, BKS Bank 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 BKS Bank

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

The idea behind Erste Group Bank and BKS Bank AG 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.