Correlation Between Bavarian Nordic and GN Store
Can any of the company-specific risk be diversified away by investing in both Bavarian Nordic and GN Store 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 Bavarian Nordic and GN Store into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bavarian Nordic and GN Store Nord, you can compare the effects of market volatilities on Bavarian Nordic and GN Store 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 Bavarian Nordic with a short position of GN Store. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bavarian Nordic and GN Store.
Diversification Opportunities for Bavarian Nordic and GN Store
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bavarian and GN Store is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and GN Store Nord in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GN Store Nord and Bavarian Nordic 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 Bavarian Nordic are associated (or correlated) with GN Store. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GN Store Nord has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and GN Store go up and down completely randomly.
Pair Corralation between Bavarian Nordic and GN Store
Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the GN Store. In addition to that, Bavarian Nordic is 1.77 times more volatile than GN Store Nord. It trades about -0.12 of its total potential returns per unit of risk. GN Store Nord is currently generating about -0.18 per unit of volatility. If you would invest 15,585 in GN Store Nord on August 28, 2024 and sell it today you would lose (2,410) from holding GN Store Nord or give up 15.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bavarian Nordic vs. GN Store Nord
Performance |
| Timeline |
| Bavarian Nordic |
| GN Store Nord |
Bavarian Nordic and GN Store Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bavarian Nordic and GN Store
The main advantage of trading using opposite Bavarian Nordic and GN Store positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bavarian Nordic position performs unexpectedly, GN Store 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 GN Store will offset losses from the drop in GN Store's long position.The idea behind Bavarian Nordic and GN Store Nord 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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