Correlation Between Erste Group and GoldMining

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

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

Diversification Opportunities for Erste Group and GoldMining

-0.25

Correlation Coefficient

Erste Group  GoldMining

Very good diversification

The 3 months correlation between Erste and GoldMining is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining and Erste Group 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 Erste Group Bank are associated (or correlated) with GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Erste Group i.e., Erste Group and GoldMining go up and down completely randomly.

Pair Corralation between Erste Group and GoldMining

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.42 times more return on investment than GoldMining. However, Erste Group Bank is 2.36 times less risky than GoldMining. It trades about 0.27 of its potential returns per unit of risk. GoldMining is currently generating about -0.09 per unit of risk. If you would invest  4,904  in Erste Group Bank on September 30, 2024 and sell it today you would earn a total of  1,001  from holding Erste Group Bank or generate 20.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.88%
Values	Daily Returns

Erste Group Bank  vs.  GoldMining

Erste Group Bank

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 20 (%) 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.

GoldMining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Erste Group and GoldMining

The main advantage of trading using opposite Erste Group and GoldMining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, GoldMining 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 GoldMining will offset losses from the drop in GoldMining's long position.

The idea behind Erste Group Bank and GoldMining 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.