Correlation Between BioPorto and Bavarian Nordic
Can any of the company-specific risk be diversified away by investing in both BioPorto 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 BioPorto and Bavarian Nordic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BioPorto and Bavarian Nordic, you can compare the effects of market volatilities on BioPorto 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 BioPorto with a short position of Bavarian Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of BioPorto and Bavarian Nordic.
Diversification Opportunities for BioPorto and Bavarian Nordic
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BioPorto and Bavarian is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BioPorto and Bavarian Nordic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bavarian Nordic and BioPorto 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 BioPorto 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 BioPorto i.e., BioPorto and Bavarian Nordic go up and down completely randomly.
Pair Corralation between BioPorto and Bavarian Nordic
Assuming the 90 days trading horizon BioPorto is expected to under-perform the Bavarian Nordic. But the stock apears to be less risky and, when comparing its historical volatility, BioPorto is 2.1 times less risky than Bavarian Nordic. The stock trades about -0.49 of its potential returns per unit of risk. The Bavarian Nordic is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 21,850 in Bavarian Nordic on August 28, 2024 and sell it today you would lose (2,845) from holding Bavarian Nordic or give up 13.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BioPorto vs. Bavarian Nordic
Performance |
| Timeline |
| BioPorto |
| Bavarian Nordic |
BioPorto and Bavarian Nordic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BioPorto and Bavarian Nordic
The main advantage of trading using opposite BioPorto and Bavarian Nordic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BioPorto 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 BioPorto 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.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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