Correlation Between BankInvest Optima and Bavarian Nordic

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

By analyzing existing cross correlation between BankInvest Optima 30 and Bavarian Nordic, you can compare the effects of market volatilities on BankInvest Optima and Bavarian Nordic 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 BankInvest Optima with a short position of Bavarian Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of BankInvest Optima and Bavarian Nordic.

Diversification Opportunities for BankInvest Optima and Bavarian Nordic

-0.8

Correlation Coefficient

BankInvest Optima  Bavarian Nordic

Pay attention - limited upside

The 3 months correlation between BankInvest and Bavarian is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding BankInvest Optima 30 and Bavarian Nordic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bavarian Nordic and BankInvest Optima 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 BankInvest Optima 30 are associated (or correlated) with Bavarian Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bavarian Nordic has no effect on the direction of BankInvest Optima i.e., BankInvest Optima and Bavarian Nordic go up and down completely randomly.

Pair Corralation between BankInvest Optima and Bavarian Nordic

Assuming the 90 days trading horizon BankInvest Optima is expected to generate 2.58 times less return on investment than Bavarian Nordic. But when comparing it to its historical volatility, BankInvest Optima 30 is 6.21 times less risky than Bavarian Nordic. It trades about 0.04 of its potential returns per unit of risk. Bavarian Nordic is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  19,245  in Bavarian Nordic on September 22, 2024 and sell it today you would earn a total of  45.00  from holding Bavarian Nordic or generate 0.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

BankInvest Optima 30  vs.  Bavarian Nordic

BankInvest Optima

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Optima 30 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BankInvest Optima is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with BankInvest Optima and Bavarian Nordic

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

The idea behind BankInvest Optima 30 and Bavarian Nordic 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.

Check out your portfolio center.

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.