Correlation Between Storebrand ASA and Nordic Semiconductor

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Can any of the company-specific risk be diversified away by investing in both Storebrand ASA 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 Storebrand ASA and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Storebrand ASA and Nordic Semiconductor ASA, you can compare the effects of market volatilities on Storebrand ASA 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 Storebrand ASA with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Storebrand ASA and Nordic Semiconductor.

Diversification Opportunities for Storebrand ASA and Nordic Semiconductor

-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Storebrand and Nordic is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Storebrand ASA 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 Storebrand ASA 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 Storebrand ASA 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 Storebrand ASA i.e., Storebrand ASA and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between Storebrand ASA and Nordic Semiconductor

Assuming the 90 days trading horizon Storebrand ASA is expected to generate 0.68 times more return on investment than Nordic Semiconductor. However, Storebrand ASA is 1.46 times less risky than Nordic Semiconductor. It trades about -0.09 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.13 per unit of risk. If you would invest  12,700  in Storebrand ASA on August 25, 2024 and sell it today you would lose (370.00) from holding Storebrand ASA or give up 2.91% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Storebrand ASA  vs.  Nordic Semiconductor ASA

 Performance 
       Timeline  
Storebrand ASA 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Storebrand ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Storebrand ASA may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Nordic Semiconductor ASA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nordic Semiconductor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Storebrand ASA and Nordic Semiconductor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Storebrand ASA and Nordic Semiconductor

The main advantage of trading using opposite Storebrand ASA and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Storebrand ASA 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.
The idea behind Storebrand ASA and Nordic Semiconductor ASA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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