Correlation Between Erste Group and Colt CZ

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

Diversification Opportunities for Erste Group and Colt CZ

0.83

Correlation Coefficient

Erste Group  Colt CZ

Very poor diversification

The 3 months correlation between Erste and Colt is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Colt CZ Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colt CZ Group 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 Colt CZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colt CZ Group has no effect on the direction of Erste Group i.e., Erste Group and Colt CZ go up and down completely randomly.

Pair Corralation between Erste Group and Colt CZ

Assuming the 90 days trading horizon Erste Group is expected to generate 1.07 times less return on investment than Colt CZ. In addition to that, Erste Group is 2.1 times more volatile than Colt CZ Group. It trades about 0.08 of its total potential returns per unit of risk. Colt CZ Group is currently generating about 0.19 per unit of volatility. If you would invest  66,900  in Colt CZ Group on December 30, 2024 and sell it today you would earn a total of  8,100  from holding Colt CZ Group or generate 12.11% return on investment over 90 days.

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

Erste Group Bank  vs.  Colt CZ Group

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.

Colt CZ Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Colt CZ Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Colt CZ may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Erste Group and Colt CZ

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

The idea behind Erste Group Bank and Colt CZ 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.