Correlation Between Erste Group and British American
Can any of the company-specific risk be diversified away by investing in both Erste Group and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Erste Group and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and British American.
Diversification Opportunities for Erste Group and British American
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Erste and British is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Erste Group i.e., Erste Group and British American go up and down completely randomly.
Pair Corralation between Erste Group and British American
Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.88 times more return on investment than British American. However, Erste Group Bank is 1.14 times less risky than British American. It trades about 0.4 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.13 per unit of risk. If you would invest 5,181 in Erste Group Bank on October 30, 2024 and sell it today you would earn a total of 996.00 from holding Erste Group Bank or generate 19.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Erste Group Bank vs. British American Tobacco
Performance |
| Timeline |
| Erste Group Bank |
| British American Tobacco |
Erste Group and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erste Group and British American
The main advantage of trading using opposite Erste Group and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Erste Group vs. JB Hunt Transport | Erste Group vs. Aptitude Software Group | Erste Group vs. Axway Software SA | Erste Group vs. Alfa Financial Software |
| British American vs. Ecclesiastical Insurance Office | British American vs. Science in Sport | British American vs. Silvercorp Metals | British American vs. Adriatic Metals |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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