Correlation Between Erste Group and JT ARCH

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

Diversification Opportunities for Erste Group and JT ARCH

0.71

Correlation Coefficient

Erste Group  JT ARCH

Poor diversification

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

Pair Corralation between Erste Group and JT ARCH

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 4.38 times more return on investment than JT ARCH. However, Erste Group is 4.38 times more volatile than JT ARCH INVESTMENTS. It trades about 0.13 of its potential returns per unit of risk. JT ARCH INVESTMENTS is currently generating about 0.2 per unit of risk. If you would invest  74,724  in Erste Group Bank on August 31, 2024 and sell it today you would earn a total of  55,276  from holding Erste Group Bank or generate 73.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	33.78%
Values	Daily Returns

Erste Group Bank  vs.  JT ARCH INVESTMENTS

Erste Group Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Erste Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

JT ARCH INVESTMENTS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JT ARCH INVESTMENTS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, JT ARCH 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 JT ARCH

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

The idea behind Erste Group Bank and JT ARCH INVESTMENTS 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.