Correlation Between Globalfoundries and Nordic Semiconductor

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

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

Diversification Opportunities for Globalfoundries and Nordic Semiconductor

-0.07

Correlation Coefficient

Globalfoundries  Nordic Semiconductor

Good diversification

The 3 months correlation between Globalfoundries and Nordic is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries 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 Globalfoundries 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 Globalfoundries 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 Globalfoundries i.e., Globalfoundries and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between Globalfoundries and Nordic Semiconductor

Considering the 90-day investment horizon Globalfoundries is expected to generate 1.1 times more return on investment than Nordic Semiconductor. However, Globalfoundries is 1.1 times more volatile than Nordic Semiconductor ASA. It trades about 0.03 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.34 per unit of risk. If you would invest  4,411  in Globalfoundries on September 27, 2024 and sell it today you would earn a total of  43.00  from holding Globalfoundries or generate 0.97% return on investment over 90 days.

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

Globalfoundries  vs.  Nordic Semiconductor ASA

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries 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. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Globalfoundries and Nordic Semiconductor

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