Correlation Between Erste Group and Air New
Can any of the company-specific risk be diversified away by investing in both Erste Group and Air New 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 Air New 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 Air New Zealand, you can compare the effects of market volatilities on Erste Group and Air New 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 Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and Air New.
Diversification Opportunities for Erste Group and Air New
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Erste and Air is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand 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 Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of Erste Group i.e., Erste Group and Air New go up and down completely randomly.
Pair Corralation between Erste Group and Air New
Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.89 times more return on investment than Air New. However, Erste Group Bank is 1.12 times less risky than Air New. It trades about 0.1 of its potential returns per unit of risk. Air New Zealand is currently generating about -0.01 per unit of risk. If you would invest 2,951 in Erste Group Bank on October 12, 2024 and sell it today you would earn a total of 3,047 from holding Erste Group Bank or generate 103.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.6% |
| Values | Daily Returns |
Erste Group Bank vs. Air New Zealand
Performance |
| Timeline |
| Erste Group Bank |
| Air New Zealand |
Erste Group and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erste Group and Air New
The main advantage of trading using opposite Erste Group and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, Air New 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 Air New will offset losses from the drop in Air New's long position.| Erste Group vs. Scottish Mortgage Investment | Erste Group vs. Japan Asia Investment | Erste Group vs. Ultra Clean Holdings | Erste Group vs. FIRST SAVINGS FINL |
| Air New vs. Kingdee International Software | Air New vs. VITEC SOFTWARE GROUP | Air New vs. Axway Software SA | Air New vs. CHINA TONTINE WINES |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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