Correlation Between Bavarian Nordic and LUXOR-B

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

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

Diversification Opportunities for Bavarian Nordic and LUXOR-B

0.48

Correlation Coefficient

Bavarian Nordic  LUXOR-B

Very weak diversification

The 3 months correlation between Bavarian and LUXOR-B is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and Investeringsselskabet Luxor AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investeringsselskabet 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 LUXOR-B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investeringsselskabet has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and LUXOR-B go up and down completely randomly.

Pair Corralation between Bavarian Nordic and LUXOR-B

Assuming the 90 days trading horizon Bavarian Nordic is expected to under-perform the LUXOR-B. In addition to that, Bavarian Nordic is 1.53 times more volatile than Investeringsselskabet Luxor AS. It trades about -0.09 of its total potential returns per unit of risk. Investeringsselskabet Luxor AS is currently generating about -0.02 per unit of volatility. If you would invest  57,500  in Investeringsselskabet Luxor AS on September 14, 2024 and sell it today you would lose (2,000) from holding Investeringsselskabet Luxor AS or give up 3.48% of portfolio value over 90 days.

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

Bavarian Nordic  vs.  Investeringsselskabet Luxor 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.

Investeringsselskabet

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Bavarian Nordic and LUXOR-B

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

The idea behind Bavarian Nordic and Investeringsselskabet Luxor 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.