Correlation Between NorAm Drilling and Nordic Semiconductor
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling 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 NorAm Drilling and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorAm Drilling AS and Nordic Semiconductor ASA, you can compare the effects of market volatilities on NorAm Drilling 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 NorAm Drilling with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Nordic Semiconductor.
Diversification Opportunities for NorAm Drilling and Nordic Semiconductor
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NorAm and Nordic is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS 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 NorAm Drilling 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 NorAm Drilling AS 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 NorAm Drilling i.e., NorAm Drilling and Nordic Semiconductor go up and down completely randomly.
Pair Corralation between NorAm Drilling and Nordic Semiconductor
Assuming the 90 days trading horizon NorAm Drilling is expected to generate 1.36 times less return on investment than Nordic Semiconductor. But when comparing it to its historical volatility, NorAm Drilling AS is 1.07 times less risky than Nordic Semiconductor. It trades about 0.35 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 10,185 in Nordic Semiconductor ASA on October 25, 2024 and sell it today you would earn a total of 1,815 from holding Nordic Semiconductor ASA or generate 17.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Nordic Semiconductor ASA
Performance |
| Timeline |
| NorAm Drilling AS |
| Nordic Semiconductor ASA |
NorAm Drilling and Nordic Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Nordic Semiconductor
The main advantage of trading using opposite NorAm Drilling and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling 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.| NorAm Drilling vs. Nordhealth AS | NorAm Drilling vs. Nordic Mining ASA | NorAm Drilling vs. Xplora Technologies As | NorAm Drilling vs. SD Standard Drilling |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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