Correlation Between Erste Group and Las Vegas
Can any of the company-specific risk be diversified away by investing in both Erste Group and Las Vegas 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 Las Vegas 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 Las Vegas Sands, you can compare the effects of market volatilities on Erste Group and Las Vegas 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 Las Vegas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and Las Vegas.
Diversification Opportunities for Erste Group and Las Vegas
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Erste and Las is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Las Vegas Sands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Las Vegas Sands 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 Las Vegas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Las Vegas Sands has no effect on the direction of Erste Group i.e., Erste Group and Las Vegas go up and down completely randomly.
Pair Corralation between Erste Group and Las Vegas
Assuming the 90 days trading horizon Erste Group is expected to generate 3.63 times less return on investment than Las Vegas. But when comparing it to its historical volatility, Erste Group Bank is 1.44 times less risky than Las Vegas. It trades about 0.03 of its potential returns per unit of risk. Las Vegas Sands is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,175 in Las Vegas Sands on September 2, 2024 and sell it today you would earn a total of 120.00 from holding Las Vegas Sands or generate 2.32% 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. Las Vegas Sands
Performance |
| Timeline |
| Erste Group Bank |
| Las Vegas Sands |
Erste Group and Las Vegas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erste Group and Las Vegas
The main advantage of trading using opposite Erste Group and Las Vegas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, Las Vegas 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 Las Vegas will offset losses from the drop in Las Vegas' long position.| Erste Group vs. LPKF Laser Electronics | Erste Group vs. Associated British Foods | Erste Group vs. Hilton Food Group | Erste Group vs. Samsung Electronics Co |
| Las Vegas vs. Ebro Foods | Las Vegas vs. Edita Food Industries | Las Vegas vs. Roebuck Food Group | Las Vegas vs. Associated British Foods |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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