Correlation Between Erste Group and AES Corp
Can any of the company-specific risk be diversified away by investing in both Erste Group and AES Corp 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 AES Corp 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 AES Corp, you can compare the effects of market volatilities on Erste Group and AES Corp 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 AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and AES Corp.
Diversification Opportunities for Erste Group and AES Corp
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Erste and AES is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp 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 AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp has no effect on the direction of Erste Group i.e., Erste Group and AES Corp go up and down completely randomly.
Pair Corralation between Erste Group and AES Corp
Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.46 times more return on investment than AES Corp. However, Erste Group Bank is 2.17 times less risky than AES Corp. It trades about 0.29 of its potential returns per unit of risk. AES Corp is currently generating about 0.03 per unit of risk. If you would invest 5,232 in Erste Group Bank on September 13, 2024 and sell it today you would earn a total of 348.00 from holding Erste Group Bank or generate 6.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Erste Group Bank vs. AES Corp
Performance |
| Timeline |
| Erste Group Bank |
| AES Corp |
Erste Group and AES Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erste Group and AES Corp
The main advantage of trading using opposite Erste Group and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, AES Corp 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 AES Corp will offset losses from the drop in AES Corp's long position.| Erste Group vs. Samsung Electronics Co | Erste Group vs. Samsung Electronics Co | Erste Group vs. Hyundai Motor | Erste Group vs. Reliance Industries Ltd |
| AES Corp vs. Park Hotels Resorts | AES Corp vs. Scandinavian Tobacco Group | AES Corp vs. Melia Hotels | AES Corp vs. Lowland Investment Co |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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