Correlation Between Nordic Semiconductor and United Internet

Can any of the company-specific risk be diversified away by investing in both Nordic Semiconductor and United Internet 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 United Internet 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 United Internet AG, you can compare the effects of market volatilities on Nordic Semiconductor and United Internet 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 United Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Semiconductor and United Internet.

Diversification Opportunities for Nordic Semiconductor and United Internet

0.52

Correlation Coefficient

Nordic Semiconductor  United Internet

Very weak diversification

The 3 months correlation between Nordic and United is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and United Internet AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Internet AG 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 United Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Internet AG has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and United Internet go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and United Internet

Assuming the 90 days trading horizon Nordic Semiconductor ASA is expected to generate 1.81 times more return on investment than United Internet. However, Nordic Semiconductor is 1.81 times more volatile than United Internet AG. It trades about 0.15 of its potential returns per unit of risk. United Internet AG is currently generating about 0.17 per unit of risk. If you would invest  10,119  in Nordic Semiconductor ASA on December 25, 2024 and sell it today you would earn a total of  3,459  from holding Nordic Semiconductor ASA or generate 34.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Nordic Semiconductor ASA  vs.  United Internet AG

Nordic Semiconductor ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nordic Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

United Internet AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Internet AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, United Internet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic Semiconductor and United Internet

The main advantage of trading using opposite Nordic Semiconductor and United Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordic Semiconductor position performs unexpectedly, United Internet 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 United Internet will offset losses from the drop in United Internet's long position.

The idea behind Nordic Semiconductor ASA and United Internet AG 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.