Correlation Between Bavarian Nordic and NKT AS

Can any of the company-specific risk be diversified away by investing in both Bavarian Nordic and NKT 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 NKT 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 NKT AS, you can compare the effects of market volatilities on Bavarian Nordic and NKT 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 NKT AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bavarian Nordic and NKT AS.

Diversification Opportunities for Bavarian Nordic and NKT AS

0.78

Correlation Coefficient

Bavarian Nordic  NKT AS

Poor diversification

The 3 months correlation between Bavarian and NKT is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and NKT AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NKT 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 NKT AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NKT AS has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and NKT AS go up and down completely randomly.

Pair Corralation between Bavarian Nordic and NKT AS

Assuming the 90 days trading horizon Bavarian Nordic is expected to generate 4.08 times less return on investment than NKT AS. In addition to that, Bavarian Nordic is 1.6 times more volatile than NKT AS. It trades about 0.01 of its total potential returns per unit of risk. NKT AS is currently generating about 0.04 per unit of volatility. If you would invest  36,176  in NKT AS on September 22, 2024 and sell it today you would earn a total of  14,874  from holding NKT AS or generate 41.12% return on investment over 90 days.

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

Bavarian Nordic  vs.  NKT 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 weak 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.

NKT AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NKT AS 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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bavarian Nordic and NKT AS

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

The idea behind Bavarian Nordic and NKT 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.