Correlation Between Erste Group and MT 1997

Can any of the company-specific risk be diversified away by investing in both Erste Group and MT 1997 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 MT 1997 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 MT 1997 AS, you can compare the effects of market volatilities on Erste Group and MT 1997 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 MT 1997. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and MT 1997.

Diversification Opportunities for Erste Group and MT 1997

-0.54

Correlation Coefficient

Erste Group  MT 1997

Excellent diversification

The 3 months correlation between Erste and KLIKY is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and MT 1997 AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT 1997 AS 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 MT 1997. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT 1997 AS has no effect on the direction of Erste Group i.e., Erste Group and MT 1997 go up and down completely randomly.

Pair Corralation between Erste Group and MT 1997

Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.76 times more return on investment than MT 1997. However, Erste Group Bank is 1.31 times less risky than MT 1997. It trades about 0.07 of its potential returns per unit of risk. MT 1997 AS is currently generating about -0.08 per unit of risk. If you would invest  124,800  in Erste Group Bank on August 31, 2024 and sell it today you would earn a total of  5,200  from holding Erste Group Bank or generate 4.17% return on investment over 90 days.

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

Erste Group Bank  vs.  MT 1997 AS

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.

MT 1997 AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MT 1997 AS has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Erste Group and MT 1997

The main advantage of trading using opposite Erste Group and MT 1997 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, MT 1997 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 MT 1997 will offset losses from the drop in MT 1997's long position.

The idea behind Erste Group Bank and MT 1997 AS 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.