Correlation Between Bavarian Nordic and Hydract AS

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

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

Diversification Opportunities for Bavarian Nordic and Hydract AS

-0.07

Correlation Coefficient

Bavarian Nordic  Hydract AS

Good diversification

The 3 months correlation between Bavarian and Hydract is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and Hydract AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydract 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 Hydract AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hydract AS has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and Hydract AS go up and down completely randomly.

Pair Corralation between Bavarian Nordic and Hydract AS

Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the Hydract AS. But the stock apears to be less risky and, when comparing its historical volatility, Bavarian Nordic is 5.92 times less risky than Hydract AS. The stock trades about -0.03 of its potential returns per unit of risk. The Hydract AS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  85.00  in Hydract AS on October 8, 2024 and sell it today you would lose (32.00) from holding Hydract AS or give up 37.65% of portfolio value over 90 days.

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

Bavarian Nordic  vs.  Hydract 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 very healthy basic indicators, Bavarian Nordic is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Hydract AS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hydract AS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Hydract AS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bavarian Nordic and Hydract AS

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

The idea behind Bavarian Nordic and Hydract 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.