Correlation Between Bavarian Nordic and Newcap Holding

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

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

Diversification Opportunities for Bavarian Nordic and Newcap Holding

-0.3

Correlation Coefficient

Bavarian Nordic  Newcap Holding

Very good diversification

The 3 months correlation between Bavarian and Newcap is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and Newcap Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcap Holding 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 Newcap Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcap Holding AS has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and Newcap Holding go up and down completely randomly.

Pair Corralation between Bavarian Nordic and Newcap Holding

Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the Newcap Holding. But the stock apears to be less risky and, when comparing its historical volatility, Bavarian Nordic is 1.86 times less risky than Newcap Holding. The stock trades about -0.09 of its potential returns per unit of risk. The Newcap Holding AS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9.75  in Newcap Holding AS on December 2, 2024 and sell it today you would earn a total of  1.25  from holding Newcap Holding AS or generate 12.82% return on investment over 90 days.

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

Bavarian Nordic  vs.  Newcap Holding 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.

Newcap Holding AS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newcap Holding AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Newcap Holding sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bavarian Nordic and Newcap Holding

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

The idea behind Bavarian Nordic and Newcap Holding 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.