Correlation Between Exor NV and BAWAG Group

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

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

Diversification Opportunities for Exor NV and BAWAG Group

0.36

Correlation Coefficient

Exor NV  BAWAG Group

Weak diversification

The 3 months correlation between Exor and BAWAG is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Exor NV 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 Exor NV 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 Exor NV 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 Exor NV i.e., Exor NV and BAWAG Group go up and down completely randomly.

Pair Corralation between Exor NV and BAWAG Group

Assuming the 90 days trading horizon Exor NV is expected to generate 18.22 times less return on investment than BAWAG Group. But when comparing it to its historical volatility, Exor NV is 1.58 times less risky than BAWAG Group. It trades about 0.01 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 28, 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 Weak
Accuracy	100.0%
Values	Daily Returns

Exor NV  vs.  BAWAG Group AG

Exor NV

Risk-Adjusted Performance

Weak

Over the last 90 days Exor NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Exor NV is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

BAWAG Group AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BAWAG Group AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, BAWAG Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exor NV and BAWAG Group

The main advantage of trading using opposite Exor NV and BAWAG Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exor NV 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 Exor NV 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.