Correlation Between Erste Group and Burgenland Holding

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

Diversification Opportunities for Erste Group and Burgenland Holding

-0.71

Correlation Coefficient

Erste Group  Burgenland Holding

Pay attention - limited upside

The 3 months correlation between Erste and Burgenland is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Burgenland Holding Aktiengesel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burgenland Holding 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 Burgenland Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burgenland Holding has no effect on the direction of Erste Group i.e., Erste Group and Burgenland Holding go up and down completely randomly.

Pair Corralation between Erste Group and Burgenland Holding

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.26 times more return on investment than Burgenland Holding. However, Erste Group is 1.26 times more volatile than Burgenland Holding Aktiengesellschaft. It trades about 0.26 of its potential returns per unit of risk. Burgenland Holding Aktiengesellschaft is currently generating about -0.1 per unit of risk. If you would invest  4,774  in Erste Group Bank on September 16, 2024 and sell it today you would earn a total of  1,134  from holding Erste Group Bank or generate 23.75% return on investment over 90 days.

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

Erste Group Bank  vs.  Burgenland Holding Aktiengesel

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. Despite fairly inconsistent basic indicators, Erste Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Burgenland Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Burgenland Holding Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Burgenland Holding is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Erste Group and Burgenland Holding

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

The idea behind Erste Group Bank and Burgenland Holding Aktiengesellschaft 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.