Correlation Between Nordic Semiconductor and Arm Holdings
Can any of the company-specific risk be diversified away by investing in both Nordic Semiconductor and Arm Holdings 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 Arm Holdings 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 Arm Holdings plc, you can compare the effects of market volatilities on Nordic Semiconductor and Arm Holdings 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 Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Semiconductor and Arm Holdings.
Diversification Opportunities for Nordic Semiconductor and Arm Holdings
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nordic and Arm is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc 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 Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Arm Holdings go up and down completely randomly.
Pair Corralation between Nordic Semiconductor and Arm Holdings
Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the Arm Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nordic Semiconductor ASA is 1.22 times less risky than Arm Holdings. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Arm Holdings plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,359 in Arm Holdings plc on August 28, 2024 and sell it today you would earn a total of 7,609 from holding Arm Holdings plc or generate 119.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 61.21% |
| Values | Daily Returns |
Nordic Semiconductor ASA vs. Arm Holdings plc
Performance |
| Timeline |
| Nordic Semiconductor ASA |
| Arm Holdings plc |
Nordic Semiconductor and Arm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordic Semiconductor and Arm Holdings
The main advantage of trading using opposite Nordic Semiconductor and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordic Semiconductor position performs unexpectedly, Arm Holdings 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 Arm Holdings will offset losses from the drop in Arm Holdings' long position.| Nordic Semiconductor vs. Nordic Semiconductor ASA | Nordic Semiconductor vs. STMicroelectronics NV | Nordic Semiconductor vs. Rohm Co Ltd | Nordic Semiconductor vs. Asm Pacific Technology |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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