Correlation Between Eurobank Ergasias and Piraeus Financial

Can any of the company-specific risk be diversified away by investing in both Eurobank Ergasias and Piraeus Financial 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 Eurobank Ergasias and Piraeus Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eurobank Ergasias Services and Piraeus Financial Holdings, you can compare the effects of market volatilities on Eurobank Ergasias and Piraeus Financial 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 Eurobank Ergasias with a short position of Piraeus Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eurobank Ergasias and Piraeus Financial.

Diversification Opportunities for Eurobank Ergasias and Piraeus Financial

0.41

Correlation Coefficient

Eurobank Ergasias  Piraeus Financial

Very weak diversification

The 3 months correlation between Eurobank and Piraeus is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Eurobank Ergasias Services and Piraeus Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piraeus Financial and Eurobank Ergasias 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 Eurobank Ergasias Services are associated (or correlated) with Piraeus Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piraeus Financial has no effect on the direction of Eurobank Ergasias i.e., Eurobank Ergasias and Piraeus Financial go up and down completely randomly.

Pair Corralation between Eurobank Ergasias and Piraeus Financial

Assuming the 90 days trading horizon Eurobank Ergasias Services is expected to generate 0.92 times more return on investment than Piraeus Financial. However, Eurobank Ergasias Services is 1.09 times less risky than Piraeus Financial. It trades about 0.14 of its potential returns per unit of risk. Piraeus Financial Holdings is currently generating about 0.0 per unit of risk. If you would invest  195.00  in Eurobank Ergasias Services on September 12, 2024 and sell it today you would earn a total of  29.00  from holding Eurobank Ergasias Services or generate 14.87% return on investment over 90 days.

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

Eurobank Ergasias Services  vs.  Piraeus Financial Holdings

Eurobank Ergasias

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eurobank Ergasias Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eurobank Ergasias sustained solid returns over the last few months and may actually be approaching a breakup point.

Piraeus Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Piraeus Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Piraeus Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eurobank Ergasias and Piraeus Financial

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

The idea behind Eurobank Ergasias Services and Piraeus Financial Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.