Correlation Between Erste Group and Digi Communications
Can any of the company-specific risk be diversified away by investing in both Erste Group and Digi Communications 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 Digi Communications 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 Digi Communications NV, you can compare the effects of market volatilities on Erste Group and Digi Communications 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 Digi Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erste Group and Digi Communications.
Diversification Opportunities for Erste Group and Digi Communications
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Erste and Digi is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Erste Group Bank and Digi Communications NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi Communications 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 Digi Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi Communications has no effect on the direction of Erste Group i.e., Erste Group and Digi Communications go up and down completely randomly.
Pair Corralation between Erste Group and Digi Communications
Assuming the 90 days trading horizon Erste Group Bank is expected to generate 0.92 times more return on investment than Digi Communications. However, Erste Group Bank is 1.09 times less risky than Digi Communications. It trades about 0.14 of its potential returns per unit of risk. Digi Communications NV is currently generating about 0.05 per unit of risk. If you would invest 29,000 in Erste Group Bank on November 3, 2024 and sell it today you would earn a total of 760.00 from holding Erste Group Bank or generate 2.62% 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. Digi Communications NV
Performance |
| Timeline |
| Erste Group Bank |
| Digi Communications |
Erste Group and Digi Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erste Group and Digi Communications
The main advantage of trading using opposite Erste Group and Digi Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erste Group position performs unexpectedly, Digi Communications 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 Digi Communications will offset losses from the drop in Digi Communications' long position.| Erste Group vs. Infinity Capital Investments | Erste Group vs. AROBS TRANSILVANIA SOFTWARE | Erste Group vs. Digi Communications NV | Erste Group vs. Compania Hoteliera InterContinental |
| Digi Communications vs. AROBS TRANSILVANIA SOFTWARE | Digi Communications vs. IM Vinaria Purcari | Digi Communications vs. TRANSILVANIA INVESTMENTS ALLIANCE | Digi Communications vs. Safetech Innovations SA |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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