Correlation Between Wiener Privatbank and Austrian Traded

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

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

Diversification Opportunities for Wiener Privatbank and Austrian Traded

0.38

Correlation Coefficient

Wiener Privatbank  Austrian Traded

Weak diversification

The 3 months correlation between Wiener and Austrian is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Wiener Privatbank SE and Austrian Traded Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austrian Traded Index and Wiener Privatbank 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 Wiener Privatbank SE are associated (or correlated) with Austrian Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austrian Traded Index has no effect on the direction of Wiener Privatbank i.e., Wiener Privatbank and Austrian Traded go up and down completely randomly.

Pair Corralation between Wiener Privatbank and Austrian Traded

Assuming the 90 days trading horizon Wiener Privatbank SE is expected to under-perform the Austrian Traded. But the stock apears to be less risky and, when comparing its historical volatility, Wiener Privatbank SE is 1.54 times less risky than Austrian Traded. The stock trades about -0.1 of its potential returns per unit of risk. The Austrian Traded Index is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  359,501  in Austrian Traded Index on September 15, 2024 and sell it today you would earn a total of  5,281  from holding Austrian Traded Index or generate 1.47% return on investment over 90 days.

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

Wiener Privatbank SE  vs.  Austrian Traded Index

Pair Trading with Wiener Privatbank and Austrian Traded

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

The idea behind Wiener Privatbank SE and Austrian Traded Index 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.