Correlation Between Nordic Semiconductor and Panasonic Corp

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

Diversification Opportunities for Nordic Semiconductor and Panasonic Corp

0.25

Correlation Coefficient

Nordic Semiconductor  Panasonic Corp

Modest diversification

The 3 months correlation between Nordic and Panasonic is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Panasonic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panasonic Corp 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 Panasonic Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panasonic Corp has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Panasonic Corp go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Panasonic Corp

Assuming the 90 days trading horizon Nordic Semiconductor ASA is expected to generate 2.96 times more return on investment than Panasonic Corp. However, Nordic Semiconductor is 2.96 times more volatile than Panasonic Corp. It trades about 0.4 of its potential returns per unit of risk. Panasonic Corp is currently generating about -1.1 per unit of risk. If you would invest  9,929  in Nordic Semiconductor ASA on October 22, 2024 and sell it today you would earn a total of  1,624  from holding Nordic Semiconductor ASA or generate 16.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	38.89%
Values	Daily Returns

Nordic Semiconductor ASA  vs.  Panasonic Corp

Nordic Semiconductor ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 10 (%) 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.

Panasonic Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Panasonic Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Panasonic Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic Semiconductor and Panasonic Corp

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

The idea behind Nordic Semiconductor ASA and Panasonic Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.