Correlation Between Voestalpine and Erste Group

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

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

Diversification Opportunities for Voestalpine and Erste Group

-0.68

Correlation Coefficient

Voestalpine  Erste Group

Excellent diversification

The 3 months correlation between Voestalpine and Erste is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Voestalpine AG 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 Voestalpine 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 Voestalpine AG 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 Voestalpine i.e., Voestalpine and Erste Group go up and down completely randomly.

Pair Corralation between Voestalpine and Erste Group

Assuming the 90 days trading horizon Voestalpine AG is expected to under-perform the Erste Group. In addition to that, Voestalpine is 1.58 times more volatile than Erste Group Bank. It trades about -0.13 of its total potential returns per unit of risk. Erste Group Bank is currently generating about 0.04 per unit of volatility. If you would invest  4,979  in Erste Group Bank on August 31, 2024 and sell it today you would earn a total of  159.00  from holding Erste Group Bank or generate 3.19% return on investment over 90 days.

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

Voestalpine AG  vs.  Erste Group Bank

Voestalpine AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voestalpine AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Erste Group Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Erste Group is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Voestalpine and Erste Group

The main advantage of trading using opposite Voestalpine and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Voestalpine 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 Voestalpine AG 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.