Correlation Between Bavarian Nordic and PF Atlantic

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

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

Diversification Opportunities for Bavarian Nordic and PF Atlantic

0.85

Correlation Coefficient

Bavarian Nordic  PF Atlantic

Very poor diversification

The 3 months correlation between Bavarian and ATLA-DKK is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and PF Atlantic Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PF Atlantic Petroleum and Bavarian Nordic 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 Bavarian Nordic are associated (or correlated) with PF Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PF Atlantic Petroleum has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and PF Atlantic go up and down completely randomly.

Pair Corralation between Bavarian Nordic and PF Atlantic

Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the PF Atlantic. But the stock apears to be less risky and, when comparing its historical volatility, Bavarian Nordic is 1.03 times less risky than PF Atlantic. The stock trades about -0.12 of its potential returns per unit of risk. The PF Atlantic Petroleum is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  253.00  in PF Atlantic Petroleum on September 3, 2024 and sell it today you would lose (58.00) from holding PF Atlantic Petroleum or give up 22.92% of portfolio value over 90 days.

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

Bavarian Nordic  vs.  PF Atlantic Petroleum

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

PF Atlantic Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PF Atlantic Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bavarian Nordic and PF Atlantic

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

The idea behind Bavarian Nordic and PF Atlantic Petroleum 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..