Correlation Between BW Offshore and Nordic Semiconductor
Can any of the company-specific risk be diversified away by investing in both BW Offshore 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 BW Offshore and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Offshore and Nordic Semiconductor ASA, you can compare the effects of market volatilities on BW Offshore 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 BW Offshore with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Nordic Semiconductor.
Diversification Opportunities for BW Offshore and Nordic Semiconductor
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BWO and Nordic is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore 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 BW Offshore 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 BW Offshore 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 BW Offshore i.e., BW Offshore and Nordic Semiconductor go up and down completely randomly.
Pair Corralation between BW Offshore and Nordic Semiconductor
Assuming the 90 days trading horizon BW Offshore is expected to generate 1.85 times more return on investment than Nordic Semiconductor. However, BW Offshore is 1.85 times more volatile than Nordic Semiconductor ASA. It trades about -0.04 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.23 per unit of risk. If you would invest 2,907 in BW Offshore on September 1, 2024 and sell it today you would lose (117.00) from holding BW Offshore or give up 4.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW Offshore vs. Nordic Semiconductor ASA
Performance |
| Timeline |
| BW Offshore |
| Nordic Semiconductor ASA |
BW Offshore and Nordic Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW Offshore and Nordic Semiconductor
The main advantage of trading using opposite BW Offshore and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore 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.The idea behind BW Offshore and Nordic Semiconductor ASA 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.| Nordic Semiconductor vs. Storebrand ASA | Nordic Semiconductor vs. DnB ASA | Nordic Semiconductor vs. Telenor ASA | Nordic Semiconductor vs. Kongsberg Gruppen ASA |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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