Correlation Between SYSTEMAIR and Nordic Semiconductor

Can any of the company-specific risk be diversified away by investing in both SYSTEMAIR 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 SYSTEMAIR and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SYSTEMAIR AB and Nordic Semiconductor ASA, you can compare the effects of market volatilities on SYSTEMAIR 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 SYSTEMAIR with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of SYSTEMAIR and Nordic Semiconductor.

Diversification Opportunities for SYSTEMAIR and Nordic Semiconductor

-0.11

Correlation Coefficient

SYSTEMAIR  Nordic Semiconductor

Good diversification

The 3 months correlation between SYSTEMAIR and Nordic is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding SYSTEMAIR AB 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 SYSTEMAIR 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 SYSTEMAIR AB 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 SYSTEMAIR i.e., SYSTEMAIR and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between SYSTEMAIR and Nordic Semiconductor

Assuming the 90 days trading horizon SYSTEMAIR AB is expected to generate 0.46 times more return on investment than Nordic Semiconductor. However, SYSTEMAIR AB is 2.18 times less risky than Nordic Semiconductor. It trades about 0.11 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.09 per unit of risk. If you would invest  704.00  in SYSTEMAIR AB on September 5, 2024 and sell it today you would earn a total of  86.00  from holding SYSTEMAIR AB or generate 12.22% return on investment over 90 days.

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

SYSTEMAIR AB  vs.  Nordic Semiconductor ASA

SYSTEMAIR AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SYSTEMAIR AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SYSTEMAIR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nordic Semiconductor ASA

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SYSTEMAIR and Nordic Semiconductor

The main advantage of trading using opposite SYSTEMAIR and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SYSTEMAIR 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 SYSTEMAIR AB 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.