Correlation Between Erste Group and Nationwide Building
Can any of the company-specific risk be diversified away by investing in both Erste Group and Nationwide Building 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 Nationwide Building 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 Nationwide Building Society, you can compare the effects of market volatilities on Erste Group and Nationwide Building 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 Nationwide Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and Nationwide Building.
Diversification Opportunities for Erste Group and Nationwide Building
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Erste and Nationwide is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Nationwide Building Society in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Building 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 Nationwide Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Building has no effect on the direction of Erste Group i.e., Erste Group and Nationwide Building go up and down completely randomly.
Pair Corralation between Erste Group and Nationwide Building
Assuming the 90 days trading horizon Erste Group Bank is expected to generate 5.77 times more return on investment than Nationwide Building. However, Erste Group is 5.77 times more volatile than Nationwide Building Society. It trades about 0.12 of its potential returns per unit of risk. Nationwide Building Society is currently generating about -0.09 per unit of risk. If you would invest 5,826 in Erste Group Bank on November 4, 2024 and sell it today you would earn a total of 164.00 from holding Erste Group Bank or generate 2.81% 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. Nationwide Building Society
Performance |
| Timeline |
| Erste Group Bank |
| Nationwide Building |
Erste Group and Nationwide Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erste Group and Nationwide Building
The main advantage of trading using opposite Erste Group and Nationwide Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, Nationwide Building 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 Nationwide Building will offset losses from the drop in Nationwide Building's long position.| Erste Group vs. Infrastrutture Wireless Italiane | Erste Group vs. Young Cos Brewery | Erste Group vs. Gaztransport et Technigaz | Erste Group vs. Alliance Data Systems |
| Nationwide Building vs. Prosiebensat 1 Media | Nationwide Building vs. MediaZest plc | Nationwide Building vs. One Media iP | Nationwide Building vs. LBG Media PLC |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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