Correlation Between Erste Group and Vienna Insurance

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

Diversification Opportunities for Erste Group and Vienna Insurance

-0.59

Correlation Coefficient

Erste Group  Vienna Insurance

Excellent diversification

The 3 months correlation between Erste and Vienna is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Vienna Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vienna Insurance 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 Vienna Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vienna Insurance has no effect on the direction of Erste Group i.e., Erste Group and Vienna Insurance go up and down completely randomly.

Pair Corralation between Erste Group and Vienna Insurance

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.35 times more return on investment than Vienna Insurance. However, Erste Group is 1.35 times more volatile than Vienna Insurance Group. It trades about 0.2 of its potential returns per unit of risk. Vienna Insurance Group is currently generating about -0.05 per unit of risk. If you would invest  4,785  in Erste Group Bank on September 12, 2024 and sell it today you would earn a total of  755.00  from holding Erste Group Bank or generate 15.78% return on investment over 90 days.

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

Erste Group Bank  vs.  Vienna Insurance Group

Erste Group Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Erste Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Vienna Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vienna Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Vienna Insurance 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 Vienna Insurance

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

The idea behind Erste Group Bank and Vienna Insurance Group 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.