Correlation Between Erste Group and Cez AS

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

Diversification Opportunities for Erste Group and Cez AS

0.42

Correlation Coefficient

Erste Group  Cez AS

Very weak diversification

The 3 months correlation between Erste and Cez is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Cez AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cez AS 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 Cez AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cez AS has no effect on the direction of Erste Group i.e., Erste Group and Cez AS go up and down completely randomly.

Pair Corralation between Erste Group and Cez AS

Assuming the 90 days trading horizon Erste Group is expected to generate 1.51 times less return on investment than Cez AS. In addition to that, Erste Group is 1.74 times more volatile than Cez AS. It trades about 0.08 of its total potential returns per unit of risk. Cez AS is currently generating about 0.22 per unit of volatility. If you would invest  95,700  in Cez AS on December 29, 2024 and sell it today you would earn a total of  17,000  from holding Cez AS or generate 17.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Erste Group Bank  vs.  Cez AS

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 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Erste Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cez AS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cez AS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cez AS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erste Group and Cez AS

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

The idea behind Erste Group Bank and Cez AS 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.