Correlation Between CSL and Bavarian Nordic
Can any of the company-specific risk be diversified away by investing in both CSL 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 CSL and Bavarian Nordic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL Limited and Bavarian Nordic AS, you can compare the effects of market volatilities on CSL 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 CSL with a short position of Bavarian Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and Bavarian Nordic.
Diversification Opportunities for CSL and Bavarian Nordic
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CSL and Bavarian is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding CSL Limited and Bavarian Nordic AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bavarian Nordic AS and CSL 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 CSL Limited 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 AS has no effect on the direction of CSL i.e., CSL and Bavarian Nordic go up and down completely randomly.
Pair Corralation between CSL and Bavarian Nordic
Assuming the 90 days horizon CSL Limited is expected to generate 0.49 times more return on investment than Bavarian Nordic. However, CSL Limited is 2.02 times less risky than Bavarian Nordic. It trades about -0.06 of its potential returns per unit of risk. Bavarian Nordic AS is currently generating about -0.13 per unit of risk. If you would invest 17,930 in CSL Limited on September 2, 2024 and sell it today you would lose (555.00) from holding CSL Limited or give up 3.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSL Limited vs. Bavarian Nordic AS
Performance |
| Timeline |
| CSL Limited |
| Bavarian Nordic AS |
CSL and Bavarian Nordic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and Bavarian Nordic
The main advantage of trading using opposite CSL and Bavarian Nordic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL 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 CSL Limited and Bavarian Nordic AS 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.| Bavarian Nordic vs. Rigel Pharmaceuticals | Bavarian Nordic vs. Geron | Bavarian Nordic vs. Verastem | Bavarian Nordic vs. Immutep Ltd ADR |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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