Correlation Between BAWAG Group and Este Lauder

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

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

Diversification Opportunities for BAWAG Group and Este Lauder

-0.4

Correlation Coefficient

BAWAG Group  Este Lauder

Very good diversification

The 3 months correlation between BAWAG and Este is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding BAWAG Group AG and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder and BAWAG 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 BAWAG Group AG are associated (or correlated) with Este Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Este Lauder has no effect on the direction of BAWAG Group i.e., BAWAG Group and Este Lauder go up and down completely randomly.

Pair Corralation between BAWAG Group and Este Lauder

Assuming the 90 days horizon BAWAG Group AG is expected to generate 0.39 times more return on investment than Este Lauder. However, BAWAG Group AG is 2.59 times less risky than Este Lauder. It trades about 0.18 of its potential returns per unit of risk. The Este Lauder is currently generating about -0.09 per unit of risk. If you would invest  6,955  in BAWAG Group AG on September 29, 2024 and sell it today you would earn a total of  1,080  from holding BAWAG Group AG or generate 15.53% return on investment over 90 days.

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

BAWAG Group AG  vs.  The Este Lauder

BAWAG Group AG

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BAWAG Group AG are ranked lower than 14 (%) 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.

Este Lauder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Este Lauder has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with BAWAG Group and Este Lauder

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

The idea behind BAWAG Group AG and The Este Lauder 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.