Correlation Between Bavarian Nordic and Integrated Wind

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

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

Diversification Opportunities for Bavarian Nordic and Integrated Wind

0.39

Correlation Coefficient

Bavarian Nordic  Integrated Wind

Weak diversification

The 3 months correlation between Bavarian and Integrated is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and Integrated Wind Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Wind Solutions 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 Integrated Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Wind Solutions has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and Integrated Wind go up and down completely randomly.

Pair Corralation between Bavarian Nordic and Integrated Wind

Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the Integrated Wind. In addition to that, Bavarian Nordic is 1.48 times more volatile than Integrated Wind Solutions. It trades about -0.13 of its total potential returns per unit of risk. Integrated Wind Solutions is currently generating about -0.02 per unit of volatility. If you would invest  5,100  in Integrated Wind Solutions on August 31, 2024 and sell it today you would lose (220.00) from holding Integrated Wind Solutions or give up 4.31% 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.  Integrated Wind Solutions

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Integrated Wind Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Integrated Wind Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Integrated Wind is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bavarian Nordic and Integrated Wind

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

The idea behind Bavarian Nordic and Integrated Wind Solutions 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.