Correlation Between Erste Group and South32
Can any of the company-specific risk be diversified away by investing in both Erste Group and South32 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 South32 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 South32, you can compare the effects of market volatilities on Erste Group and South32 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 South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and South32.
Diversification Opportunities for Erste Group and South32
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Erste and South32 is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and South32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 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 South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 has no effect on the direction of Erste Group i.e., Erste Group and South32 go up and down completely randomly.
Pair Corralation between Erste Group and South32
Assuming the 90 days trading horizon Erste Group Bank is expected to generate 1.06 times more return on investment than South32. However, Erste Group is 1.06 times more volatile than South32. It trades about 0.17 of its potential returns per unit of risk. South32 is currently generating about -0.03 per unit of risk. If you would invest 5,339 in Erste Group Bank on December 3, 2024 and sell it today you would earn a total of 1,067 from holding Erste Group Bank or generate 19.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Erste Group Bank vs. South32
Performance |
| Timeline |
| Erste Group Bank |
| South32 |
Erste Group and South32 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erste Group and South32
The main advantage of trading using opposite Erste Group and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.| Erste Group vs. Zegona Communications Plc | Erste Group vs. Universal Display Corp | Erste Group vs. Fevertree Drinks Plc | Erste Group vs. JD Sports Fashion |
| South32 vs. SMA Solar Technology | South32 vs. Wheaton Precious Metals | South32 vs. Eastinco Mining Exploration | South32 vs. Raytheon Technologies Corp |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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