Correlation Between Erste Group and Voestalpine

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

Diversification Opportunities for Erste Group and Voestalpine

-0.68

Correlation Coefficient

Erste Group  Voestalpine

Excellent diversification

The 3 months correlation between Erste and Voestalpine is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Voestalpine AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voestalpine AG 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 Voestalpine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voestalpine AG has no effect on the direction of Erste Group i.e., Erste Group and Voestalpine go up and down completely randomly.

Pair Corralation between Erste Group and Voestalpine

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.63 times more return on investment than Voestalpine. However, Erste Group Bank is 1.58 times less risky than Voestalpine. It trades about 0.04 of its potential returns per unit of risk. Voestalpine AG is currently generating about -0.13 per unit of risk. If you would invest  4,979  in Erste Group Bank on August 31, 2024 and sell it today you would earn a total of  159.00  from holding Erste Group Bank or generate 3.19% 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.  Voestalpine AG

Erste Group Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Erste Group is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Voestalpine AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voestalpine AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Erste Group and Voestalpine

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

The idea behind Erste Group Bank and Voestalpine AG 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.