Correlation Between Morningstar Unconstrained and Erste Group

Can any of the company-specific risk be diversified away by investing in both Morningstar Unconstrained and Erste Group 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 Morningstar Unconstrained and Erste Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Morningstar Unconstrained Allocation and Erste Group Bank, you can compare the effects of market volatilities on Morningstar Unconstrained and Erste Group 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 Morningstar Unconstrained with a short position of Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Unconstrained and Erste Group.

Diversification Opportunities for Morningstar Unconstrained and Erste Group

0.25

Correlation Coefficient

Morningstar Unconstrained  Erste Group

Modest diversification

The 3 months correlation between Morningstar and Erste is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Unconstrained Allo and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank and Morningstar Unconstrained 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 Morningstar Unconstrained Allocation are associated (or correlated) with Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Morningstar Unconstrained i.e., Morningstar Unconstrained and Erste Group go up and down completely randomly.

Pair Corralation between Morningstar Unconstrained and Erste Group

Assuming the 90 days horizon Morningstar Unconstrained is expected to generate 2.93 times less return on investment than Erste Group. But when comparing it to its historical volatility, Morningstar Unconstrained Allocation is 2.41 times less risky than Erste Group. It trades about 0.08 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,402  in Erste Group Bank on September 17, 2024 and sell it today you would earn a total of  1,685  from holding Erste Group Bank or generate 120.19% return on investment over 90 days.

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

Morningstar Unconstrained Allo  vs.  Erste Group Bank

Morningstar Unconstrained

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar Unconstrained Allocation are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Morningstar Unconstrained is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Erste Group Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Erste Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morningstar Unconstrained and Erste Group

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

The idea behind Morningstar Unconstrained Allocation and Erste Group Bank 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.