Correlation Between Tetragon Financial and Erste Group

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

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

Diversification Opportunities for Tetragon Financial and Erste Group

0.79

Correlation Coefficient

Tetragon Financial  Erste Group

Poor diversification

The 3 months correlation between Tetragon and Erste is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Tetragon Financial Group 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 Tetragon Financial 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 Tetragon Financial Group 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 Tetragon Financial i.e., Tetragon Financial and Erste Group go up and down completely randomly.

Pair Corralation between Tetragon Financial and Erste Group

Assuming the 90 days trading horizon Tetragon Financial Group is expected to generate 1.74 times more return on investment than Erste Group. However, Tetragon Financial is 1.74 times more volatile than Erste Group Bank. It trades about 0.28 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.24 per unit of risk. If you would invest  1,006  in Tetragon Financial Group on October 10, 2024 and sell it today you would earn a total of  399.00  from holding Tetragon Financial Group or generate 39.66% return on investment over 90 days.

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

Tetragon Financial Group  vs.  Erste Group Bank

Tetragon Financial

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tetragon Financial Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Tetragon Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Erste Group Bank

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Erste Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tetragon Financial and Erste Group

The main advantage of trading using opposite Tetragon Financial and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tetragon Financial 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 Tetragon Financial Group 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.