Correlation Between Bavarian Nordic and Carlsberg

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

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

Diversification Opportunities for Bavarian Nordic and Carlsberg

0.83

Correlation Coefficient

Bavarian Nordic  Carlsberg

Very poor diversification

The 3 months correlation between Bavarian and Carlsberg is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg AS 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 Carlsberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg AS has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and Carlsberg go up and down completely randomly.

Pair Corralation between Bavarian Nordic and Carlsberg

Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the Carlsberg. In addition to that, Bavarian Nordic is 2.0 times more volatile than Carlsberg AS. It trades about -0.07 of its total potential returns per unit of risk. Carlsberg AS is currently generating about -0.14 per unit of volatility. If you would invest  80,560  in Carlsberg AS on October 4, 2024 and sell it today you would lose (10,800) from holding Carlsberg AS or give up 13.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Bavarian Nordic  vs.  Carlsberg AS

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg 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 basic 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.

Pair Trading with Bavarian Nordic and Carlsberg

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

The idea behind Bavarian Nordic and Carlsberg AS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.