Correlation Between MT 1997 and Erste Group

Can any of the company-specific risk be diversified away by investing in both MT 1997 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 MT 1997 and Erste Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MT 1997 AS and Erste Group Bank, you can compare the effects of market volatilities on MT 1997 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 MT 1997 with a short position of Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT 1997 and Erste Group.

Diversification Opportunities for MT 1997 and Erste Group

0.56

Correlation Coefficient

MT 1997  Erste Group

Very weak diversification

The 3 months correlation between KLIKY and Erste is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding MT 1997 AS 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 MT 1997 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 MT 1997 AS 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 MT 1997 i.e., MT 1997 and Erste Group go up and down completely randomly.

Pair Corralation between MT 1997 and Erste Group

Assuming the 90 days trading horizon MT 1997 is expected to generate 4.98 times less return on investment than Erste Group. But when comparing it to its historical volatility, MT 1997 AS is 1.31 times less risky than Erste Group. It trades about 0.08 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  130,000  in Erste Group Bank on November 28, 2024 and sell it today you would earn a total of  39,100  from holding Erste Group Bank or generate 30.08% return on investment over 90 days.

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

MT 1997 AS  vs.  Erste Group Bank

MT 1997 AS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MT 1997 AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, MT 1997 is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Erste Group Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Erste Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MT 1997 and Erste Group

The main advantage of trading using opposite MT 1997 and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT 1997 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 MT 1997 AS 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.