Correlation Between Bavarian Nordic and HAVN Life

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

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

Diversification Opportunities for Bavarian Nordic and HAVN Life

-0.71

Correlation Coefficient

Bavarian Nordic  HAVN Life

Pay attention - limited upside

The 3 months correlation between Bavarian and HAVN is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic AS and HAVN Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HAVN Life Sciences 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 AS are associated (or correlated) with HAVN Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HAVN Life Sciences has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and HAVN Life go up and down completely randomly.

Pair Corralation between Bavarian Nordic and HAVN Life

Assuming the 90 days horizon Bavarian Nordic is expected to generate 211.54 times less return on investment than HAVN Life. But when comparing it to its historical volatility, Bavarian Nordic AS is 65.98 times less risky than HAVN Life. It trades about 0.04 of its potential returns per unit of risk. HAVN Life Sciences is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.52  in HAVN Life Sciences on October 17, 2024 and sell it today you would lose (0.42) from holding HAVN Life Sciences or give up 80.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Bavarian Nordic AS  vs.  HAVN Life Sciences

Bavarian Nordic AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bavarian Nordic AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HAVN Life Sciences

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HAVN Life Sciences are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, HAVN Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bavarian Nordic and HAVN Life

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

The idea behind Bavarian Nordic AS and HAVN Life Sciences 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.