Correlation Between Gulf Island and Bavarian Nordic

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

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

Diversification Opportunities for Gulf Island and Bavarian Nordic

-0.86

Correlation Coefficient

Gulf Island  Bavarian Nordic

Pay attention - limited upside

The 3 months correlation between Gulf and Bavarian is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication 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 Gulf Island 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 Gulf Island Fabrication 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 Gulf Island i.e., Gulf Island and Bavarian Nordic go up and down completely randomly.

Pair Corralation between Gulf Island and Bavarian Nordic

Given the investment horizon of 90 days Gulf Island Fabrication is expected to generate 0.83 times more return on investment than Bavarian Nordic. However, Gulf Island Fabrication is 1.21 times less risky than Bavarian Nordic. It trades about -0.02 of its potential returns per unit of risk. Bavarian Nordic AS is currently generating about -0.04 per unit of risk. If you would invest  694.00  in Gulf Island Fabrication on September 23, 2024 and sell it today you would lose (8.00) from holding Gulf Island Fabrication or give up 1.15% of portfolio value over 90 days.

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

Gulf Island Fabrication  vs.  Bavarian Nordic AS

Gulf Island Fabrication

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gulf Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Gulf Island and Bavarian Nordic

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

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.