Correlation Between Nordic Semiconductor and Aker BP
Can any of the company-specific risk be diversified away by investing in both Nordic Semiconductor and Aker BP 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 Aker BP 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 Aker BP ASA, you can compare the effects of market volatilities on Nordic Semiconductor and Aker BP 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 Aker BP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Semiconductor and Aker BP.
Diversification Opportunities for Nordic Semiconductor and Aker BP
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nordic and Aker is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA 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 Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Aker BP go up and down completely randomly.
Pair Corralation between Nordic Semiconductor and Aker BP
Assuming the 90 days trading horizon Nordic Semiconductor ASA is expected to under-perform the Aker BP. In addition to that, Nordic Semiconductor is 1.3 times more volatile than Aker BP ASA. It trades about -0.23 of its total potential returns per unit of risk. Aker BP ASA is currently generating about -0.02 per unit of volatility. If you would invest 22,798 in Aker BP ASA on September 1, 2024 and sell it today you would lose (158.00) from holding Aker BP ASA or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordic Semiconductor ASA vs. Aker BP ASA
Performance |
| Timeline |
| Nordic Semiconductor ASA |
| Aker BP ASA |
Nordic Semiconductor and Aker BP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordic Semiconductor and Aker BP
The main advantage of trading using opposite Nordic Semiconductor and Aker BP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordic Semiconductor position performs unexpectedly, Aker BP 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 Aker BP will offset losses from the drop in Aker BP's long position.| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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