Correlation Between Austrian Traded and Raiffeisen Bank

Can any of the company-specific risk be diversified away by investing in both Austrian Traded and Raiffeisen Bank 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 Raiffeisen Bank 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 Raiffeisen Bank International, you can compare the effects of market volatilities on Austrian Traded and Raiffeisen Bank 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 Raiffeisen Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austrian Traded and Raiffeisen Bank.

Diversification Opportunities for Austrian Traded and Raiffeisen Bank

-0.72

Correlation Coefficient

Austrian Traded  Raiffeisen Bank

Pay attention - limited upside

The 3 months correlation between Austrian and Raiffeisen is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Austrian Traded Index and Raiffeisen Bank International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raiffeisen Bank Inte 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 Raiffeisen Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raiffeisen Bank Inte has no effect on the direction of Austrian Traded i.e., Austrian Traded and Raiffeisen Bank go up and down completely randomly.

Pair Corralation between Austrian Traded and Raiffeisen Bank

Assuming the 90 days trading horizon Austrian Traded Index is expected to generate 0.25 times more return on investment than Raiffeisen Bank. However, Austrian Traded Index is 3.97 times less risky than Raiffeisen Bank. It trades about 0.0 of its potential returns per unit of risk. Raiffeisen Bank International is currently generating about -0.09 per unit of risk. If you would invest  359,233  in Austrian Traded Index on February 6, 2024 and sell it today you would lose (137.00) from holding Austrian Traded Index or give up 0.04% of portfolio value over 90 days.

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

Austrian Traded Index  vs.  Raiffeisen Bank International

Pair Trading with Austrian Traded and Raiffeisen Bank

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

The idea behind Austrian Traded Index and Raiffeisen Bank International 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.