Correlation Between Bavarian Nordic and Risma Systems

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

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

Diversification Opportunities for Bavarian Nordic and Risma Systems

0.11

Correlation Coefficient

Bavarian Nordic  Risma Systems

Average diversification

The 3 months correlation between Bavarian and Risma is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and Risma Systems AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Risma Systems 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 Risma Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Risma Systems AS has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and Risma Systems go up and down completely randomly.

Pair Corralation between Bavarian Nordic and Risma Systems

Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the Risma Systems. But the stock apears to be less risky and, when comparing its historical volatility, Bavarian Nordic is 2.32 times less risky than Risma Systems. The stock trades about -0.12 of its potential returns per unit of risk. The Risma Systems AS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  740.00  in Risma Systems AS on December 24, 2024 and sell it today you would lose (20.00) from holding Risma Systems AS or give up 2.7% of portfolio value over 90 days.

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

Bavarian Nordic  vs.  Risma Systems 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.

Risma Systems AS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Risma Systems AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Risma Systems is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bavarian Nordic and Risma Systems

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

The idea behind Bavarian Nordic and Risma Systems 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 Global Correlations module to find global opportunities by holding instruments from different markets.