Correlation Between Sparinvest INDEX and Bavarian Nordic

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

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

Diversification Opportunities for Sparinvest INDEX and Bavarian Nordic

-0.36

Correlation Coefficient

Sparinvest INDEX  Bavarian Nordic

Very good diversification

The 3 months correlation between Sparinvest and Bavarian is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest INDEX Globale and Bavarian Nordic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bavarian Nordic and Sparinvest INDEX 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 Sparinvest INDEX Globale 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 Sparinvest INDEX i.e., Sparinvest INDEX and Bavarian Nordic go up and down completely randomly.

Pair Corralation between Sparinvest INDEX and Bavarian Nordic

Assuming the 90 days trading horizon Sparinvest INDEX Globale is expected to generate 0.31 times more return on investment than Bavarian Nordic. However, Sparinvest INDEX Globale is 3.2 times less risky than Bavarian Nordic. It trades about 0.08 of its potential returns per unit of risk. Bavarian Nordic is currently generating about -0.12 per unit of risk. If you would invest  13,319  in Sparinvest INDEX Globale on December 28, 2024 and sell it today you would earn a total of  451.00  from holding Sparinvest INDEX Globale or generate 3.39% return on investment over 90 days.

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

Sparinvest INDEX Globale  vs.  Bavarian Nordic

Sparinvest INDEX Globale

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Globale are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Sparinvest INDEX is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Bavarian Nordic

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sparinvest INDEX and Bavarian Nordic

The main advantage of trading using opposite Sparinvest INDEX and Bavarian Nordic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparinvest INDEX 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 Sparinvest INDEX Globale 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.