Correlation Between New Residential and Nordic Semiconductor
Can any of the company-specific risk be diversified away by investing in both New Residential 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 New Residential and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and Nordic Semiconductor ASA, you can compare the effects of market volatilities on New Residential 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 New Residential with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Nordic Semiconductor.
Diversification Opportunities for New Residential and Nordic Semiconductor
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Nordic is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment 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 New Residential 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 New Residential Investment 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 New Residential i.e., New Residential and Nordic Semiconductor go up and down completely randomly.
Pair Corralation between New Residential and Nordic Semiconductor
Assuming the 90 days trading horizon New Residential is expected to generate 5.81 times less return on investment than Nordic Semiconductor. But when comparing it to its historical volatility, New Residential Investment is 2.94 times less risky than Nordic Semiconductor. It trades about 0.08 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 853.00 in Nordic Semiconductor ASA on December 28, 2024 and sell it today you would earn a total of 323.00 from holding Nordic Semiconductor ASA or generate 37.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
New Residential Investment vs. Nordic Semiconductor ASA
Performance |
Timeline |
New Residential Inve |
Nordic Semiconductor ASA |
New Residential and Nordic Semiconductor Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with New Residential and Nordic Semiconductor
The main advantage of trading using opposite New Residential and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential 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.New Residential vs. Vulcan Materials | New Residential vs. Mitsubishi Materials | New Residential vs. Brockhaus Capital Management | New Residential vs. Waste Management |
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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