Correlation Between Bavarian Nordic and BankInvest Optima

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

By analyzing existing cross correlation between Bavarian Nordic and BankInvest Optima 30, you can compare the effects of market volatilities on Bavarian Nordic and BankInvest Optima 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 BankInvest Optima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bavarian Nordic and BankInvest Optima.

Diversification Opportunities for Bavarian Nordic and BankInvest Optima

-0.8

Correlation Coefficient

Bavarian Nordic  BankInvest Optima

Pay attention - limited upside

The 3 months correlation between Bavarian and BankInvest is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and BankInvest Optima 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankInvest Optima 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 BankInvest Optima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankInvest Optima has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and BankInvest Optima go up and down completely randomly.

Pair Corralation between Bavarian Nordic and BankInvest Optima

Assuming the 90 days trading horizon Bavarian Nordic is expected to generate 6.21 times more return on investment than BankInvest Optima. However, Bavarian Nordic is 6.21 times more volatile than BankInvest Optima 30. It trades about 0.02 of its potential returns per unit of risk. BankInvest Optima 30 is currently generating about 0.04 per unit of risk. If you would invest  19,245  in Bavarian Nordic on September 22, 2024 and sell it today you would earn a total of  45.00  from holding Bavarian Nordic or generate 0.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Bavarian Nordic  vs.  BankInvest Optima 30

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.

BankInvest Optima

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Optima 30 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BankInvest Optima is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bavarian Nordic and BankInvest Optima

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

The idea behind Bavarian Nordic and BankInvest Optima 30 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.