Correlation Between Alfa Financial and Nordic Semiconductor

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

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

Diversification Opportunities for Alfa Financial and Nordic Semiconductor

-0.57

Correlation Coefficient

Alfa Financial  Nordic Semiconductor

Excellent diversification

The 3 months correlation between Alfa and Nordic is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software 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 Alfa Financial 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 Alfa Financial Software 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 Alfa Financial i.e., Alfa Financial and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between Alfa Financial and Nordic Semiconductor

Assuming the 90 days trading horizon Alfa Financial Software is expected to under-perform the Nordic Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Alfa Financial Software is 2.33 times less risky than Nordic Semiconductor. The stock trades about -0.42 of its potential returns per unit of risk. The Nordic Semiconductor ASA is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  10,119  in Nordic Semiconductor ASA on October 26, 2024 and sell it today you would earn a total of  1,716  from holding Nordic Semiconductor ASA or generate 16.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Alfa Financial Software  vs.  Nordic Semiconductor ASA

Alfa Financial Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Financial Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nordic Semiconductor ASA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nordic Semiconductor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alfa Financial and Nordic Semiconductor

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

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.