Correlation Between Meta Financial and Erste Group

Can any of the company-specific risk be diversified away by investing in both Meta Financial 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 Meta Financial and Erste Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Meta Financial Group and Erste Group Bank, you can compare the effects of market volatilities on Meta Financial 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 Meta Financial with a short position of Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Financial and Erste Group.

Diversification Opportunities for Meta Financial and Erste Group

0.05

Correlation Coefficient

Meta Financial  Erste Group

Significant diversification

The 3 months correlation between Meta and Erste is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Meta Financial Group 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 Meta Financial 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 Meta Financial Group 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 Meta Financial i.e., Meta Financial and Erste Group go up and down completely randomly.

Pair Corralation between Meta Financial and Erste Group

Assuming the 90 days horizon Meta Financial Group is expected to under-perform the Erste Group. But the stock apears to be less risky and, when comparing its historical volatility, Meta Financial Group is 1.17 times less risky than Erste Group. The stock trades about -0.02 of its potential returns per unit of risk. The Erste Group Bank is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,026  in Erste Group Bank on April 25, 2025 and sell it today you would earn a total of  1,564  from holding Erste Group Bank or generate 25.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Meta Financial Group  vs.  Erste Group Bank

Meta Financial Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meta Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Meta Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Erste Group Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Erste Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meta Financial and Erste Group

The main advantage of trading using opposite Meta Financial and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Financial 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 Meta Financial Group 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.