Correlation Between Nordic Semiconductor and Bell Food
Can any of the company-specific risk be diversified away by investing in both Nordic Semiconductor and Bell Food 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 Nordic Semiconductor and Bell Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nordic Semiconductor ASA and Bell Food Group, you can compare the effects of market volatilities on Nordic Semiconductor and Bell Food 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 Nordic Semiconductor with a short position of Bell Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Semiconductor and Bell Food.
Diversification Opportunities for Nordic Semiconductor and Bell Food
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nordic and Bell is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Bell Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bell Food Group and Nordic Semiconductor 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 Nordic Semiconductor ASA are associated (or correlated) with Bell Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bell Food Group has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Bell Food go up and down completely randomly.
Pair Corralation between Nordic Semiconductor and Bell Food
Assuming the 90 days trading horizon Nordic Semiconductor ASA is expected to generate 1.69 times more return on investment than Bell Food. However, Nordic Semiconductor is 1.69 times more volatile than Bell Food Group. It trades about 0.16 of its potential returns per unit of risk. Bell Food Group is currently generating about -0.07 per unit of risk. If you would invest 9,922 in Nordic Semiconductor ASA on October 30, 2024 and sell it today you would earn a total of 1,343 from holding Nordic Semiconductor ASA or generate 13.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordic Semiconductor ASA vs. Bell Food Group
Performance |
| Timeline |
| Nordic Semiconductor ASA |
| Bell Food Group |
Nordic Semiconductor and Bell Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordic Semiconductor and Bell Food
The main advantage of trading using opposite Nordic Semiconductor and Bell Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordic Semiconductor position performs unexpectedly, Bell Food 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 Bell Food will offset losses from the drop in Bell Food's long position.The idea behind Nordic Semiconductor ASA and Bell Food Group 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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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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