Correlation Between LUXOR-B and Bavarian Nordic

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

Diversification Opportunities for LUXOR-B and Bavarian Nordic

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between LUXOR-B and Bavarian is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Investeringsselskabet Luxor AS and Bavarian Nordic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bavarian Nordic and LUXOR-B 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 Investeringsselskabet Luxor AS 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 LUXOR-B i.e., LUXOR-B and Bavarian Nordic go up and down completely randomly.

Pair Corralation between LUXOR-B and Bavarian Nordic

Assuming the 90 days trading horizon LUXOR-B is expected to generate 5.65 times less return on investment than Bavarian Nordic. But when comparing it to its historical volatility, Investeringsselskabet Luxor AS is 1.66 times less risky than Bavarian Nordic. It trades about 0.01 of its potential returns per unit of risk. Bavarian Nordic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  16,530  in Bavarian Nordic on August 29, 2024 and sell it today you would earn a total of  2,475  from holding Bavarian Nordic or generate 14.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

Investeringsselskabet Luxor AS  vs.  Bavarian Nordic

 Performance 
       Timeline  
Investeringsselskabet 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Investeringsselskabet Luxor AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LUXOR-B is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the 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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

LUXOR-B and Bavarian Nordic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LUXOR-B and Bavarian Nordic

The main advantage of trading using opposite LUXOR-B and Bavarian Nordic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LUXOR-B 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 Investeringsselskabet Luxor AS 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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