Correlation Between Norofert and Erste Group

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

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

Diversification Opportunities for Norofert and Erste Group

-0.21

Correlation Coefficient

Norofert  Erste Group

Very good diversification

The 3 months correlation between Norofert and Erste is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Norofert SA 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 Norofert 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 Norofert SA 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 Norofert i.e., Norofert and Erste Group go up and down completely randomly.

Pair Corralation between Norofert and Erste Group

Assuming the 90 days trading horizon Norofert SA is expected to under-perform the Erste Group. In addition to that, Norofert is 1.49 times more volatile than Erste Group Bank. It trades about -0.1 of its total potential returns per unit of risk. Erste Group Bank is currently generating about 0.29 per unit of volatility. If you would invest  23,760  in Erste Group Bank on October 24, 2024 and sell it today you would earn a total of  6,890  from holding Erste Group Bank or generate 29.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.73%
Values	Daily Returns

Norofert SA  vs.  Erste Group Bank

Norofert SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norofert SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Erste Group Bank

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Erste Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norofert and Erste Group

The main advantage of trading using opposite Norofert and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norofert 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 Norofert SA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.