Correlation Between Lumia and Erste Group
Can any of the company-specific risk be diversified away by investing in both Lumia and Erste Group 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 Lumia and Erste Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and Erste Group Bank, you can compare the effects of market volatilities on Lumia and Erste Group 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 Lumia with a short position of Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and Erste Group.
Diversification Opportunities for Lumia and Erste Group
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lumia and Erste is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank and Lumia 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 Lumia are associated (or correlated) with Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Lumia i.e., Lumia and Erste Group go up and down completely randomly.
Pair Corralation between Lumia and Erste Group
Assuming the 90 days trading horizon Lumia is expected to under-perform the Erste Group. In addition to that, Lumia is 4.13 times more volatile than Erste Group Bank. It trades about -0.32 of its total potential returns per unit of risk. Erste Group Bank is currently generating about 0.16 per unit of volatility. If you would invest 3,072 in Erste Group Bank on October 25, 2024 and sell it today you would earn a total of 127.00 from holding Erste Group Bank or generate 4.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Lumia vs. Erste Group Bank
Performance |
| Timeline |
| Lumia |
| Erste Group Bank |
Lumia and Erste Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and Erste Group
The main advantage of trading using opposite Lumia and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia position performs unexpectedly, Erste Group 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 Erste Group will offset losses from the drop in Erste Group's long position.The idea behind Lumia and Erste Group Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Erste Group vs. DBS Group Holdings | Erste Group vs. Swedbank AB | Erste Group vs. United Overseas Bank | Erste Group vs. Bank Mandiri Persero |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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