Correlation Between Sparebank and Nordic Semiconductor
Can any of the company-specific risk be diversified away by investing in both Sparebank and Nordic Semiconductor 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 Sparebank and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 SR and Nordic Semiconductor ASA, you can compare the effects of market volatilities on Sparebank and Nordic Semiconductor 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 Sparebank with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Nordic Semiconductor.
Diversification Opportunities for Sparebank and Nordic Semiconductor
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sparebank and Nordic is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and Nordic Semiconductor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Semiconductor ASA and Sparebank 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 Sparebank 1 SR are associated (or correlated) with Nordic Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Semiconductor ASA has no effect on the direction of Sparebank i.e., Sparebank and Nordic Semiconductor go up and down completely randomly.
Pair Corralation between Sparebank and Nordic Semiconductor
Assuming the 90 days trading horizon Sparebank is expected to generate 13.04 times less return on investment than Nordic Semiconductor. But when comparing it to its historical volatility, Sparebank 1 SR is 5.39 times less risky than Nordic Semiconductor. It trades about 0.1 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 11,258 in Nordic Semiconductor ASA on November 28, 2024 and sell it today you would earn a total of 3,315 from holding Nordic Semiconductor ASA or generate 29.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sparebank 1 SR vs. Nordic Semiconductor ASA
Performance |
| Timeline |
| Sparebank 1 SR |
| Nordic Semiconductor ASA |
Sparebank and Nordic Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and Nordic Semiconductor
The main advantage of trading using opposite Sparebank and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank position performs unexpectedly, Nordic Semiconductor 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 Nordic Semiconductor will offset losses from the drop in Nordic Semiconductor's long position.| Sparebank vs. Pfeiffer Vacuum Technology | Sparebank vs. Monster Beverage Corp | Sparebank vs. Bytes Technology | Sparebank vs. Software Circle plc |
| Nordic Semiconductor vs. URU Metals | Nordic Semiconductor vs. AMG Advanced Metallurgical | Nordic Semiconductor vs. Southern Copper Corp | Nordic Semiconductor vs. Eastinco Mining Exploration |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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