Correlation Between Spar Nord and Bavarian Nordic

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

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

Diversification Opportunities for Spar Nord and Bavarian Nordic

-0.22

Correlation Coefficient

Spar Nord  Bavarian Nordic

Very good diversification

The 3 months correlation between Spar and Bavarian is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Spar Nord Bank and Bavarian Nordic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bavarian Nordic and Spar Nord 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 Spar Nord Bank 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 Spar Nord i.e., Spar Nord and Bavarian Nordic go up and down completely randomly.

Pair Corralation between Spar Nord and Bavarian Nordic

Assuming the 90 days trading horizon Spar Nord Bank is expected to generate 2.51 times more return on investment than Bavarian Nordic. However, Spar Nord is 2.51 times more volatile than Bavarian Nordic. It trades about 0.14 of its potential returns per unit of risk. Bavarian Nordic is currently generating about -0.07 per unit of risk. If you would invest  13,920  in Spar Nord Bank on November 29, 2024 and sell it today you would earn a total of  6,930  from holding Spar Nord Bank or generate 49.78% return on investment over 90 days.

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

Spar Nord Bank  vs.  Bavarian Nordic

Spar Nord Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spar Nord Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Spar Nord displayed solid returns over the last few months and may actually be approaching a breakup point.

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 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 Spar Nord and Bavarian Nordic

The main advantage of trading using opposite Spar Nord and Bavarian Nordic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spar Nord 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 Spar Nord Bank 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.