Correlation Between Este Lauder and Erste Group

Can any of the company-specific risk be diversified away by investing in both Este Lauder and Erste Group 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 Este Lauder and Erste Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Este Lauder and Erste Group Bank, you can compare the effects of market volatilities on Este Lauder and Erste Group 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 Este Lauder with a short position of Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Este Lauder and Erste Group.

Diversification Opportunities for Este Lauder and Erste Group

-0.55

Correlation Coefficient

Este Lauder  Erste Group

Excellent diversification

The 3 months correlation between Este and Erste is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Este Lauder and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank and Este Lauder 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 The Este Lauder are associated (or correlated) with Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Este Lauder i.e., Este Lauder and Erste Group go up and down completely randomly.

Pair Corralation between Este Lauder and Erste Group

Assuming the 90 days trading horizon The Este Lauder is expected to under-perform the Erste Group. In addition to that, Este Lauder is 1.32 times more volatile than Erste Group Bank. It trades about -0.05 of its total potential returns per unit of risk. Erste Group Bank is currently generating about 0.07 per unit of volatility. If you would invest  5,966  in Erste Group Bank on December 29, 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 Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

The Este Lauder  vs.  Erste Group Bank

Este Lauder

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Este Lauder has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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.

Pair Trading with Este Lauder and Erste Group

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

The idea behind The Este Lauder and Erste Group Bank 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..