Correlation Between Erste Group and Nippon Light
Can any of the company-specific risk be diversified away by investing in both Erste Group and Nippon Light 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 Nippon Light 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 Nippon Light Metal, you can compare the effects of market volatilities on Erste Group and Nippon Light 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 Nippon Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and Nippon Light.
Diversification Opportunities for Erste Group and Nippon Light
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Erste and Nippon is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Nippon Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Light Metal 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 Nippon Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Light Metal has no effect on the direction of Erste Group i.e., Erste Group and Nippon Light go up and down completely randomly.
Pair Corralation between Erste Group and Nippon Light
Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.69 times more return on investment than Nippon Light. However, Erste Group Bank is 1.46 times less risky than Nippon Light. It trades about 0.18 of its potential returns per unit of risk. Nippon Light Metal is currently generating about -0.03 per unit of risk. If you would invest 4,596 in Erste Group Bank on October 16, 2024 and sell it today you would earn a total of 1,422 from holding Erste Group Bank or generate 30.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Erste Group Bank vs. Nippon Light Metal
Performance |
| Timeline |
| Erste Group Bank |
| Nippon Light Metal |
Erste Group and Nippon Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erste Group and Nippon Light
The main advantage of trading using opposite Erste Group and Nippon Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, Nippon Light 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 Nippon Light will offset losses from the drop in Nippon Light's long position.| Erste Group vs. Sch Environnement SA | Erste Group vs. Lifeway Foods | Erste Group vs. EBRO FOODS | Erste Group vs. INDOFOOD AGRI RES |
| Nippon Light vs. alstria office REIT AG | Nippon Light vs. Dairy Farm International | Nippon Light vs. Hanison Construction Holdings | Nippon Light vs. MAGNUM MINING EXP |
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 Directory module to find actively traded commodities issued by global exchanges.
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