Correlation Between Erste Group and IM Vinaria

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

Diversification Opportunities for Erste Group and IM Vinaria

-0.3

Correlation Coefficient

Erste Group  IM Vinaria

Very good diversification

The 3 months correlation between Erste and WINE is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and IM Vinaria Purcari in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IM Vinaria Purcari 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 IM Vinaria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IM Vinaria Purcari has no effect on the direction of Erste Group i.e., Erste Group and IM Vinaria go up and down completely randomly.

Pair Corralation between Erste Group and IM Vinaria

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.02 times more return on investment than IM Vinaria. However, Erste Group is 1.02 times more volatile than IM Vinaria Purcari. It trades about 0.27 of its potential returns per unit of risk. IM Vinaria Purcari is currently generating about 0.03 per unit of risk. If you would invest  23,850  in Erste Group Bank on September 15, 2024 and sell it today you would earn a total of  5,250  from holding Erste Group Bank or generate 22.01% return on investment over 90 days.

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

Erste Group Bank  vs.  IM Vinaria Purcari

Erste Group Bank

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Erste Group displayed solid returns over the last few months and may actually be approaching a breakup point.

IM Vinaria Purcari

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IM Vinaria Purcari are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IM Vinaria is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Erste Group and IM Vinaria

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

The idea behind Erste Group Bank and IM Vinaria Purcari 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .