Correlation Between Bavarian Nordic and Zealand Pharma

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

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

Diversification Opportunities for Bavarian Nordic and Zealand Pharma

0.25

Correlation Coefficient

Bavarian Nordic  Zealand Pharma

Modest diversification

The 3 months correlation between Bavarian and Zealand is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and Zealand Pharma AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zealand Pharma 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 Zealand Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zealand Pharma AS has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and Zealand Pharma go up and down completely randomly.

Pair Corralation between Bavarian Nordic and Zealand Pharma

Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the Zealand Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Bavarian Nordic is 1.12 times less risky than Zealand Pharma. The stock trades about -0.09 of its potential returns per unit of risk. The Zealand Pharma AS is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  72,700  in Zealand Pharma AS on December 1, 2024 and sell it today you would lose (6,400) from holding Zealand Pharma AS or give up 8.8% 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.  Zealand Pharma 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.

Zealand Pharma AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zealand Pharma AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bavarian Nordic and Zealand Pharma

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

The idea behind Bavarian Nordic and Zealand Pharma 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.