Correlation Between Erste Group and Beowulf Mining

Can any of the company-specific risk be diversified away by investing in both Erste Group and Beowulf Mining 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 Beowulf Mining 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 Beowulf Mining, you can compare the effects of market volatilities on Erste Group and Beowulf Mining 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 Beowulf Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and Beowulf Mining.

Diversification Opportunities for Erste Group and Beowulf Mining

-0.86

Correlation Coefficient

Erste Group  Beowulf Mining

Pay attention - limited upside

The 3 months correlation between Erste and Beowulf is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Beowulf Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beowulf Mining 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 Beowulf Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beowulf Mining has no effect on the direction of Erste Group i.e., Erste Group and Beowulf Mining go up and down completely randomly.

Pair Corralation between Erste Group and Beowulf Mining

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.27 times more return on investment than Beowulf Mining. However, Erste Group Bank is 3.71 times less risky than Beowulf Mining. It trades about 0.26 of its potential returns per unit of risk. Beowulf Mining is currently generating about -0.18 per unit of risk. If you would invest  4,899  in Erste Group Bank on September 27, 2024 and sell it today you would earn a total of  985.00  from holding Erste Group Bank or generate 20.11% return on investment over 90 days.

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

Erste Group Bank  vs.  Beowulf Mining

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.

Beowulf Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beowulf Mining 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Erste Group and Beowulf Mining

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

The idea behind Erste Group Bank and Beowulf Mining 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.