Correlation Between Erste Group and Quadrise Plc

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

Diversification Opportunities for Erste Group and Quadrise Plc

0.88

Correlation Coefficient

Erste Group  Quadrise Plc

Very poor diversification

The 3 months correlation between Erste and Quadrise is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Quadrise Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quadrise Plc 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 Quadrise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quadrise Plc has no effect on the direction of Erste Group i.e., Erste Group and Quadrise Plc go up and down completely randomly.

Pair Corralation between Erste Group and Quadrise Plc

Assuming the 90 days trading horizon Erste Group is expected to generate 8.85 times less return on investment than Quadrise Plc. But when comparing it to its historical volatility, Erste Group Bank is 9.26 times less risky than Quadrise Plc. It trades about 0.26 of its potential returns per unit of risk. Quadrise Plc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  145.00  in Quadrise Plc on September 27, 2024 and sell it today you would earn a total of  414.00  from holding Quadrise Plc or generate 285.52% return on investment over 90 days.

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

Erste Group Bank  vs.  Quadrise Plc

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.

Quadrise Plc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quadrise Plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Quadrise Plc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erste Group and Quadrise Plc

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

The idea behind Erste Group Bank and Quadrise Plc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.