Correlation Between London Security and Nordic Semiconductor
Can any of the company-specific risk be diversified away by investing in both London Security 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 London Security and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Security Plc and Nordic Semiconductor ASA, you can compare the effects of market volatilities on London Security 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 London Security with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Nordic Semiconductor.
Diversification Opportunities for London Security and Nordic Semiconductor
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between London and Nordic is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc 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 London Security 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 London Security Plc 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 London Security i.e., London Security and Nordic Semiconductor go up and down completely randomly.
Pair Corralation between London Security and Nordic Semiconductor
Assuming the 90 days trading horizon London Security Plc is expected to generate 0.58 times more return on investment than Nordic Semiconductor. However, London Security Plc is 1.74 times less risky than Nordic Semiconductor. It trades about 0.22 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.01 per unit of risk. If you would invest 325,000 in London Security Plc on September 24, 2024 and sell it today you would earn a total of 15,000 from holding London Security Plc or generate 4.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Security Plc vs. Nordic Semiconductor ASA
Performance |
| Timeline |
| London Security Plc |
| Nordic Semiconductor ASA |
London Security and Nordic Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Nordic Semiconductor
The main advantage of trading using opposite London Security and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security 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.| London Security vs. Tungsten West PLC | London Security vs. Argo Group Limited | London Security vs. Hardide PLC | London Security vs. Gfinity PLC |
| Nordic Semiconductor vs. Uniper SE | Nordic Semiconductor vs. Mulberry Group PLC | Nordic Semiconductor vs. London Security Plc | Nordic Semiconductor vs. Triad Group PLC |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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