Correlation Between Bavarian Nordic and Nova Mentis

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

Diversification Opportunities for Bavarian Nordic and Nova Mentis

0.18

Correlation Coefficient

Bavarian Nordic  Nova Mentis

Average diversification

The 3 months correlation between Bavarian and Nova is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic AS and Nova Mentis Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Mentis Life 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 Nova Mentis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Mentis Life has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and Nova Mentis go up and down completely randomly.

Pair Corralation between Bavarian Nordic and Nova Mentis

Assuming the 90 days horizon Bavarian Nordic AS is expected to under-perform the Nova Mentis. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bavarian Nordic AS is 9.71 times less risky than Nova Mentis. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Nova Mentis Life is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Nova Mentis Life on September 23, 2024 and sell it today you would lose (0.25) from holding Nova Mentis Life or give up 10.0% of portfolio value over 90 days.

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

Bavarian Nordic AS  vs.  Nova Mentis Life

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 fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nova Mentis Life

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Mentis Life are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nova Mentis reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bavarian Nordic and Nova Mentis

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

The idea behind Bavarian Nordic AS and Nova Mentis Life 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.