Correlation Between Metro Bank and Nordic Semiconductor
Can any of the company-specific risk be diversified away by investing in both Metro Bank 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 Metro Bank and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Bank PLC and Nordic Semiconductor ASA, you can compare the effects of market volatilities on Metro Bank 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 Metro Bank with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Bank and Nordic Semiconductor.
Diversification Opportunities for Metro Bank and Nordic Semiconductor
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Metro and Nordic is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Metro Bank 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 Metro Bank 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 Metro Bank 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 Metro Bank i.e., Metro Bank and Nordic Semiconductor go up and down completely randomly.
Pair Corralation between Metro Bank and Nordic Semiconductor
Assuming the 90 days trading horizon Metro Bank PLC is expected to generate 1.0 times more return on investment than Nordic Semiconductor. However, Metro Bank PLC is 1.0 times less risky than Nordic Semiconductor. It trades about 0.0 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 12,640 in Metro Bank PLC on October 11, 2024 and sell it today you would lose (3,290) from holding Metro Bank PLC or give up 26.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Bank PLC vs. Nordic Semiconductor ASA
Performance |
| Timeline |
| Metro Bank PLC |
| Nordic Semiconductor ASA |
Metro Bank and Nordic Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro Bank and Nordic Semiconductor
The main advantage of trading using opposite Metro Bank and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Bank 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.| Metro Bank vs. JD Sports Fashion | Metro Bank vs. Molson Coors Beverage | Metro Bank vs. Verizon Communications | Metro Bank vs. Universal Display Corp |
| Nordic Semiconductor vs. Cizzle Biotechnology Holdings | Nordic Semiconductor vs. Edita Food Industries | Nordic Semiconductor vs. Spotify Technology SA | Nordic Semiconductor vs. Alfa Financial Software |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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