Correlation Between ON SEMICONDUCTOR and Nordic Semiconductor
Can any of the company-specific risk be diversified away by investing in both ON SEMICONDUCTOR 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 ON SEMICONDUCTOR and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ON SEMICONDUCTOR and Nordic Semiconductor ASA, you can compare the effects of market volatilities on ON SEMICONDUCTOR 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 ON SEMICONDUCTOR with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of ON SEMICONDUCTOR and Nordic Semiconductor.
Diversification Opportunities for ON SEMICONDUCTOR and Nordic Semiconductor
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between XS4 and Nordic is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR 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 ON 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 ON SEMICONDUCTOR 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 ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and Nordic Semiconductor go up and down completely randomly.
Pair Corralation between ON SEMICONDUCTOR and Nordic Semiconductor
Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to generate 1.05 times more return on investment than Nordic Semiconductor. However, ON SEMICONDUCTOR is 1.05 times more volatile than Nordic Semiconductor ASA. It trades about -0.03 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.2 per unit of risk. If you would invest 6,796 in ON SEMICONDUCTOR on August 31, 2024 and sell it today you would lose (151.00) from holding ON SEMICONDUCTOR or give up 2.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
ON SEMICONDUCTOR vs. Nordic Semiconductor ASA
Performance |
| Timeline |
| ON SEMICONDUCTOR |
| Nordic Semiconductor ASA |
ON SEMICONDUCTOR and Nordic Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ON SEMICONDUCTOR and Nordic Semiconductor
The main advantage of trading using opposite ON SEMICONDUCTOR and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON SEMICONDUCTOR 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.| ON SEMICONDUCTOR vs. SIVERS SEMICONDUCTORS AB | ON SEMICONDUCTOR vs. Darden Restaurants | ON SEMICONDUCTOR vs. Reliance Steel Aluminum | ON SEMICONDUCTOR vs. Q2M Managementberatung AG |
| Nordic Semiconductor vs. NVIDIA | Nordic Semiconductor vs. Taiwan Semiconductor Manufacturing | Nordic Semiconductor vs. Intel |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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