Correlation Between Bavarian Nordic and Copenhagen Capital

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

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

Diversification Opportunities for Bavarian Nordic and Copenhagen Capital

-0.7

Correlation Coefficient

Bavarian Nordic  Copenhagen Capital

Excellent diversification

The 3 months correlation between Bavarian and Copenhagen is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and Copenhagen Capital AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copenhagen Capital 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 Copenhagen Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copenhagen Capital has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and Copenhagen Capital go up and down completely randomly.

Pair Corralation between Bavarian Nordic and Copenhagen Capital

Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the Copenhagen Capital. In addition to that, Bavarian Nordic is 1.68 times more volatile than Copenhagen Capital AS. It trades about -0.12 of its total potential returns per unit of risk. Copenhagen Capital AS is currently generating about 0.08 per unit of volatility. If you would invest  510.00  in Copenhagen Capital AS on December 28, 2024 and sell it today you would earn a total of  30.00  from holding Copenhagen Capital AS or generate 5.88% return on investment over 90 days.

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

Bavarian Nordic  vs.  Copenhagen Capital AS

Bavarian Nordic

Risk-Adjusted Performance

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

Copenhagen Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Copenhagen Capital AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Copenhagen Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bavarian Nordic and Copenhagen Capital

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

The idea behind Bavarian Nordic and Copenhagen Capital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.