Correlation Between Bavarian Nordic and H Lundbeck

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

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

Diversification Opportunities for Bavarian Nordic and H Lundbeck

0.26

Correlation Coefficient

Bavarian Nordic  H Lundbeck

Modest diversification

The 3 months correlation between Bavarian and HLUN-B is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and H Lundbeck AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H Lundbeck 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 H Lundbeck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H Lundbeck AS has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and H Lundbeck go up and down completely randomly.

Pair Corralation between Bavarian Nordic and H Lundbeck

Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the H Lundbeck. In addition to that, Bavarian Nordic is 1.34 times more volatile than H Lundbeck AS. It trades about -0.13 of its total potential returns per unit of risk. H Lundbeck AS is currently generating about -0.05 per unit of volatility. If you would invest  4,182  in H Lundbeck AS on December 25, 2024 and sell it today you would lose (222.00) from holding H Lundbeck AS or give up 5.31% of portfolio value over 90 days.

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

Bavarian Nordic  vs.  H Lundbeck 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.

H Lundbeck AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days H Lundbeck AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, H Lundbeck is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bavarian Nordic and H Lundbeck

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

The idea behind Bavarian Nordic and H Lundbeck 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.