Correlation Between Bavarian Nordic and Diamyd Medical

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

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

Diversification Opportunities for Bavarian Nordic and Diamyd Medical

0.28

Correlation Coefficient

Bavarian Nordic  Diamyd Medical

Modest diversification

The 3 months correlation between Bavarian and Diamyd is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and Diamyd Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamyd Medical AB 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 Diamyd Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamyd Medical AB has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and Diamyd Medical go up and down completely randomly.

Pair Corralation between Bavarian Nordic and Diamyd Medical

Assuming the 90 days trading horizon Bavarian Nordic is expected to generate 3.56 times less return on investment than Diamyd Medical. But when comparing it to its historical volatility, Bavarian Nordic is 1.53 times less risky than Diamyd Medical. It trades about 0.01 of its potential returns per unit of risk. Diamyd Medical AB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,395  in Diamyd Medical AB on September 15, 2024 and sell it today you would earn a total of  197.00  from holding Diamyd Medical AB or generate 14.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Bavarian Nordic  vs.  Diamyd Medical AB

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 unfluctuating 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.

Diamyd Medical AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diamyd Medical AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Diamyd Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bavarian Nordic and Diamyd Medical

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

The idea behind Bavarian Nordic and Diamyd Medical AB 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.