Correlation Between Erste Group and VERBUND AG

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

Diversification Opportunities for Erste Group and VERBUND AG

-0.39

Correlation Coefficient

Erste Group  VERBUND AG

Very good diversification

The 3 months correlation between Erste and VERBUND is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and VERBUND AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VERBUND 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 VERBUND AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VERBUND AG has no effect on the direction of Erste Group i.e., Erste Group and VERBUND AG go up and down completely randomly.

Pair Corralation between Erste Group and VERBUND AG

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.82 times more return on investment than VERBUND AG. However, Erste Group is 1.82 times more volatile than VERBUND AG. It trades about 0.03 of its potential returns per unit of risk. VERBUND AG is currently generating about -0.26 per unit of risk. If you would invest  6,464  in Erste Group Bank on December 30, 2024 and sell it today you would earn a total of  74.00  from holding Erste Group Bank or generate 1.14% 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.  VERBUND 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.

VERBUND AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days VERBUND AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, VERBUND AG 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 VERBUND AG

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

The idea behind Erste Group Bank and VERBUND 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.