Correlation Between Nordic Semiconductor and Tower Semiconductor
Can any of the company-specific risk be diversified away by investing in both Nordic Semiconductor and Tower 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 Nordic Semiconductor and Tower Semiconductor 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 Tower Semiconductor, you can compare the effects of market volatilities on Nordic Semiconductor and Tower 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 Nordic Semiconductor with a short position of Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Semiconductor and Tower Semiconductor.
Diversification Opportunities for Nordic Semiconductor and Tower Semiconductor
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nordic and Tower is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Tower Semiconductor go up and down completely randomly.
Pair Corralation between Nordic Semiconductor and Tower Semiconductor
Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the Tower Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Nordic Semiconductor ASA is 2.13 times less risky than Tower Semiconductor. The stock trades about -0.19 of its potential returns per unit of risk. The Tower Semiconductor is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,118 in Tower Semiconductor on August 30, 2024 and sell it today you would earn a total of 386.00 from holding Tower Semiconductor or generate 9.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordic Semiconductor ASA vs. Tower Semiconductor
Performance |
| Timeline |
| Nordic Semiconductor ASA |
| Tower Semiconductor |
Nordic Semiconductor and Tower Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordic Semiconductor and Tower Semiconductor
The main advantage of trading using opposite Nordic Semiconductor and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordic Semiconductor position performs unexpectedly, Tower 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 Tower Semiconductor will offset losses from the drop in Tower Semiconductor's long position.| Nordic Semiconductor vs. NVIDIA | Nordic Semiconductor vs. Texas Instruments Incorporated | Nordic Semiconductor vs. Advanced Micro Devices | Nordic Semiconductor vs. Advanced Micro Devices |
| Tower Semiconductor vs. NVIDIA | Tower Semiconductor vs. Texas Instruments Incorporated | Tower Semiconductor vs. Advanced Micro Devices | Tower Semiconductor vs. Advanced Micro Devices |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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