Correlation Between Bavarian Nordic and Djurslands Bank

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

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

Diversification Opportunities for Bavarian Nordic and Djurslands Bank

-0.75

Correlation Coefficient

Bavarian Nordic  Djurslands Bank

Pay attention - limited upside

The 3 months correlation between Bavarian and Djurslands is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and Djurslands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Djurslands Bank 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 Djurslands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Djurslands Bank has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and Djurslands Bank go up and down completely randomly.

Pair Corralation between Bavarian Nordic and Djurslands Bank

Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the Djurslands Bank. In addition to that, Bavarian Nordic is 1.26 times more volatile than Djurslands Bank. It trades about -0.13 of its total potential returns per unit of risk. Djurslands Bank is currently generating about 0.12 per unit of volatility. If you would invest  58,000  in Djurslands Bank on December 26, 2024 and sell it today you would earn a total of  7,500  from holding Djurslands Bank or generate 12.93% 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.  Djurslands Bank

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.

Djurslands Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Djurslands Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Djurslands Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bavarian Nordic and Djurslands Bank

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

The idea behind Bavarian Nordic and Djurslands Bank 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.