Correlation Between Alefarm Brewing and Bavarian Nordic

Can any of the company-specific risk be diversified away by investing in both Alefarm Brewing and Bavarian Nordic 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 Alefarm Brewing and Bavarian Nordic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alefarm Brewing AS and Bavarian Nordic, you can compare the effects of market volatilities on Alefarm Brewing and Bavarian Nordic 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 Alefarm Brewing with a short position of Bavarian Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alefarm Brewing and Bavarian Nordic.

Diversification Opportunities for Alefarm Brewing and Bavarian Nordic

0.52

Correlation Coefficient

Alefarm Brewing  Bavarian Nordic

Very weak diversification

The 3 months correlation between Alefarm and Bavarian is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Alefarm Brewing AS and Bavarian Nordic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bavarian Nordic and Alefarm Brewing 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 Alefarm Brewing AS are associated (or correlated) with Bavarian Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bavarian Nordic has no effect on the direction of Alefarm Brewing i.e., Alefarm Brewing and Bavarian Nordic go up and down completely randomly.

Pair Corralation between Alefarm Brewing and Bavarian Nordic

Assuming the 90 days trading horizon Alefarm Brewing AS is expected to under-perform the Bavarian Nordic. But the stock apears to be less risky and, when comparing its historical volatility, Alefarm Brewing AS is 1.02 times less risky than Bavarian Nordic. The stock trades about -0.12 of its potential returns per unit of risk. The Bavarian Nordic is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  20,690  in Bavarian Nordic on October 6, 2024 and sell it today you would lose (725.00) from holding Bavarian Nordic or give up 3.5% of portfolio value over 90 days.

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

Alefarm Brewing AS  vs.  Bavarian Nordic

Alefarm Brewing AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alefarm Brewing AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bavarian Nordic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bavarian Nordic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Alefarm Brewing and Bavarian Nordic

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

The idea behind Alefarm Brewing AS and Bavarian Nordic 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.