Correlation Between FAST RETAIL and Nordic Semiconductor

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

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

Diversification Opportunities for FAST RETAIL and Nordic Semiconductor

-0.32

Correlation Coefficient

FAST RETAIL  Nordic Semiconductor

Very good diversification

The 3 months correlation between FAST and Nordic is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR 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 FAST RETAIL 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 FAST RETAIL ADR 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 FAST RETAIL i.e., FAST RETAIL and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between FAST RETAIL and Nordic Semiconductor

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to under-perform the Nordic Semiconductor. In addition to that, FAST RETAIL is 1.96 times more volatile than Nordic Semiconductor ASA. It trades about -0.21 of its total potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about 0.95 per unit of volatility. If you would invest  825.00  in Nordic Semiconductor ASA on October 22, 2024 and sell it today you would earn a total of  155.00  from holding Nordic Semiconductor ASA or generate 18.79% return on investment over 90 days.

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

FAST RETAIL ADR  vs.  Nordic Semiconductor ASA

FAST RETAIL ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FAST RETAIL ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FAST RETAIL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nordic Semiconductor ASA

Risk-Adjusted Performance

11 of 100

OK

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. Despite nearly fragile basic indicators, Nordic Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FAST RETAIL and Nordic Semiconductor

The main advantage of trading using opposite FAST RETAIL and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL 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 FAST RETAIL ADR 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 Global Correlations module to find global opportunities by holding instruments from different markets.