Correlation Between Erste Group and CTP NV

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

Diversification Opportunities for Erste Group and CTP NV

-0.74

Correlation Coefficient

Erste Group  CTP NV

Pay attention - limited upside

The 3 months correlation between Erste and CTP is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and CTP NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTP NV 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 CTP NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTP NV has no effect on the direction of Erste Group i.e., Erste Group and CTP NV go up and down completely randomly.

Pair Corralation between Erste Group and CTP NV

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.7 times more return on investment than CTP NV. However, Erste Group Bank is 1.44 times less risky than CTP NV. It trades about 0.3 of its potential returns per unit of risk. CTP NV is currently generating about -0.06 per unit of risk. If you would invest  121,400  in Erste Group Bank on September 20, 2024 and sell it today you would earn a total of  26,700  from holding Erste Group Bank or generate 21.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Erste Group Bank  vs.  CTP NV

Erste Group Bank

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Erste Group reported solid returns over the last few months and may actually be approaching a breakup point.

CTP NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTP NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, CTP NV is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Erste Group and CTP NV

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

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