Correlation Between Diamyd Medical and Bavarian Nordic

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

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

Diversification Opportunities for Diamyd Medical and Bavarian Nordic

-0.28

Correlation Coefficient

Diamyd Medical  Bavarian Nordic

Very good diversification

The 3 months correlation between Diamyd and Bavarian is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Diamyd Medical AB and Bavarian Nordic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bavarian Nordic and Diamyd Medical 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 Diamyd Medical AB 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 Diamyd Medical i.e., Diamyd Medical and Bavarian Nordic go up and down completely randomly.

Pair Corralation between Diamyd Medical and Bavarian Nordic

Assuming the 90 days trading horizon Diamyd Medical AB is expected to generate 0.98 times more return on investment than Bavarian Nordic. However, Diamyd Medical AB is 1.02 times less risky than Bavarian Nordic. It trades about 0.18 of its potential returns per unit of risk. Bavarian Nordic is currently generating about -0.05 per unit of risk. If you would invest  1,332  in Diamyd Medical AB on October 22, 2024 and sell it today you would earn a total of  484.00  from holding Diamyd Medical AB or generate 36.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Diamyd Medical AB  vs.  Bavarian Nordic

Diamyd Medical AB

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Diamyd Medical AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Diamyd Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak 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 Diamyd Medical and Bavarian Nordic

The main advantage of trading using opposite Diamyd Medical and Bavarian Nordic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamyd Medical 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 Diamyd Medical AB 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.