Correlation Between UNIQA Insurance and Erste Group

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

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

Diversification Opportunities for UNIQA Insurance and Erste Group

0.8

Correlation Coefficient

UNIQA Insurance  Erste Group

Very poor diversification

The 3 months correlation between UNIQA and Erste is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding UNIQA Insurance 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 UNIQA Insurance 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 UNIQA Insurance 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 UNIQA Insurance i.e., UNIQA Insurance and Erste Group go up and down completely randomly.

Pair Corralation between UNIQA Insurance and Erste Group

Assuming the 90 days trading horizon UNIQA Insurance Group is expected to generate 0.42 times more return on investment than Erste Group. However, UNIQA Insurance Group is 2.37 times less risky than Erste Group. It trades about 0.37 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.07 per unit of risk. If you would invest  783.00  in UNIQA Insurance Group on December 29, 2024 and sell it today you would earn a total of  206.00  from holding UNIQA Insurance Group or generate 26.31% return on investment over 90 days.

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

UNIQA Insurance Group  vs.  Erste Group Bank

UNIQA Insurance Group

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in UNIQA Insurance Group are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, UNIQA Insurance demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 UNIQA Insurance and Erste Group

The main advantage of trading using opposite UNIQA Insurance and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNIQA Insurance 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 UNIQA Insurance 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.