Correlation Between FMC and Bavarian Nordic

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

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

Diversification Opportunities for FMC and Bavarian Nordic

0.6

Correlation Coefficient

FMC  Bavarian Nordic

Poor diversification

The 3 months correlation between FMC and Bavarian is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Bavarian Nordic AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bavarian Nordic AS and FMC 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 FMC Corporation 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 AS has no effect on the direction of FMC i.e., FMC and Bavarian Nordic go up and down completely randomly.

Pair Corralation between FMC and Bavarian Nordic

Considering the 90-day investment horizon FMC Corporation is expected to under-perform the Bavarian Nordic. In addition to that, FMC is 1.22 times more volatile than Bavarian Nordic AS. It trades about -0.39 of its total potential returns per unit of risk. Bavarian Nordic AS is currently generating about -0.07 per unit of volatility. If you would invest  895.00  in Bavarian Nordic AS on October 5, 2024 and sell it today you would lose (24.00) from holding Bavarian Nordic AS or give up 2.68% of portfolio value over 90 days.

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

FMC Corp.  vs.  Bavarian Nordic AS

FMC Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FMC Corporation 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 primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with FMC and Bavarian Nordic

The main advantage of trading using opposite FMC and Bavarian Nordic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FMC 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 FMC Corporation and Bavarian Nordic 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 CEOs Directory module to screen CEOs from public companies around the world.