Correlation Between Bavarian Nordic and FOM Technologies

Can any of the company-specific risk be diversified away by investing in both Bavarian Nordic and FOM Technologies 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 FOM Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bavarian Nordic and FOM Technologies AS, you can compare the effects of market volatilities on Bavarian Nordic and FOM Technologies 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 FOM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bavarian Nordic and FOM Technologies.

Diversification Opportunities for Bavarian Nordic and FOM Technologies

0.88

Correlation Coefficient

Bavarian Nordic  FOM Technologies

Very poor diversification

The 3 months correlation between Bavarian and FOM is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and FOM Technologies AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FOM Technologies 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 FOM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FOM Technologies has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and FOM Technologies go up and down completely randomly.

Pair Corralation between Bavarian Nordic and FOM Technologies

Assuming the 90 days trading horizon Bavarian Nordic is expected to generate 0.55 times more return on investment than FOM Technologies. However, Bavarian Nordic is 1.81 times less risky than FOM Technologies. It trades about -0.09 of its potential returns per unit of risk. FOM Technologies AS is currently generating about -0.1 per unit of risk. If you would invest  24,840  in Bavarian Nordic on September 14, 2024 and sell it today you would lose (4,950) from holding Bavarian Nordic or give up 19.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Bavarian Nordic  vs.  FOM Technologies AS

Bavarian Nordic

Risk-Adjusted Performance

0 of 100

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.

FOM Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FOM Technologies AS 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 primary 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.

Pair Trading with Bavarian Nordic and FOM Technologies

The main advantage of trading using opposite Bavarian Nordic and FOM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bavarian Nordic position performs unexpectedly, FOM Technologies 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 FOM Technologies will offset losses from the drop in FOM Technologies' long position.

The idea behind Bavarian Nordic and FOM Technologies 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.