Correlation Between Scandinavian ChemoTech and Bavarian Nordic

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Can any of the company-specific risk be diversified away by investing in both Scandinavian ChemoTech 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 Scandinavian ChemoTech and Bavarian Nordic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scandinavian ChemoTech AB and Bavarian Nordic, you can compare the effects of market volatilities on Scandinavian ChemoTech 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 Scandinavian ChemoTech with a short position of Bavarian Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian ChemoTech and Bavarian Nordic.

Diversification Opportunities for Scandinavian ChemoTech and Bavarian Nordic

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Scandinavian and Bavarian is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian ChemoTech AB and Bavarian Nordic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bavarian Nordic and Scandinavian ChemoTech 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 Scandinavian ChemoTech AB 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 Scandinavian ChemoTech i.e., Scandinavian ChemoTech and Bavarian Nordic go up and down completely randomly.

Pair Corralation between Scandinavian ChemoTech and Bavarian Nordic

Assuming the 90 days trading horizon Scandinavian ChemoTech AB is expected to under-perform the Bavarian Nordic. In addition to that, Scandinavian ChemoTech is 1.17 times more volatile than Bavarian Nordic. It trades about -0.02 of its total potential returns per unit of risk. Bavarian Nordic is currently generating about 0.06 per unit of volatility. If you would invest  15,915  in Bavarian Nordic on September 14, 2024 and sell it today you would earn a total of  3,975  from holding Bavarian Nordic or generate 24.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.22%
ValuesDaily Returns

Scandinavian ChemoTech AB  vs.  Bavarian Nordic

 Performance 
       Timeline  
Scandinavian ChemoTech 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Scandinavian ChemoTech AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat 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.
Bavarian Nordic 

Risk-Adjusted Performance

0 of 100

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

Scandinavian ChemoTech and Bavarian Nordic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Scandinavian ChemoTech and Bavarian Nordic

The main advantage of trading using opposite Scandinavian ChemoTech and Bavarian Nordic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian ChemoTech 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.
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The idea behind Scandinavian ChemoTech AB 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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