Correlation Between Austrian Traded and BAWAG Group

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

By analyzing existing cross correlation between Austrian Traded Index and BAWAG Group AG, you can compare the effects of market volatilities on Austrian Traded and BAWAG 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 Austrian Traded with a short position of BAWAG Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austrian Traded and BAWAG Group.

Diversification Opportunities for Austrian Traded and BAWAG Group

0.97

Correlation Coefficient

Austrian Traded  BAWAG Group

Almost no diversification

The 3 months correlation between Austrian and BAWAG is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Austrian Traded Index and BAWAG Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAWAG Group AG and Austrian Traded 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 Austrian Traded Index are associated (or correlated) with BAWAG Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAWAG Group AG has no effect on the direction of Austrian Traded i.e., Austrian Traded and BAWAG Group go up and down completely randomly.

Pair Corralation between Austrian Traded and BAWAG Group

Assuming the 90 days trading horizon Austrian Traded is expected to generate 1.21 times less return on investment than BAWAG Group. But when comparing it to its historical volatility, Austrian Traded Index is 1.6 times less risky than BAWAG Group. It trades about 0.17 of its potential returns per unit of risk. BAWAG Group AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,115  in BAWAG Group AG on December 30, 2024 and sell it today you would earn a total of  1,335  from holding BAWAG Group AG or generate 16.45% return on investment over 90 days.

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

Austrian Traded Index  vs.  BAWAG Group AG

Pair Trading with Austrian Traded and BAWAG Group

The main advantage of trading using opposite Austrian Traded and BAWAG Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austrian Traded position performs unexpectedly, BAWAG 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 BAWAG Group will offset losses from the drop in BAWAG Group's long position.

The idea behind Austrian Traded Index and BAWAG Group AG 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.