Correlation Between Monks Investment and Erste Group

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

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

Diversification Opportunities for Monks Investment and Erste Group

-0.29

Correlation Coefficient

Monks Investment  Erste Group

Very good diversification

The 3 months correlation between Monks and Erste is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust 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 Monks Investment 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 Monks Investment Trust 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 Monks Investment i.e., Monks Investment and Erste Group go up and down completely randomly.

Pair Corralation between Monks Investment and Erste Group

Assuming the 90 days trading horizon Monks Investment Trust is expected to under-perform the Erste Group. But the stock apears to be less risky and, when comparing its historical volatility, Monks Investment Trust is 1.77 times less risky than Erste Group. The stock trades about -0.06 of its potential returns per unit of risk. The Erste Group Bank is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,936  in Erste Group Bank on December 30, 2024 and sell it today you would earn a total of  665.00  from holding Erste Group Bank or generate 11.2% return on investment over 90 days.

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

Monks Investment Trust  vs.  Erste Group Bank

Monks Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monks Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monks Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of comparatively uncertain basic indicators, Erste Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Monks Investment and Erste Group

The main advantage of trading using opposite Monks Investment and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monks Investment 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 Monks Investment Trust 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.