Correlation Between Kaiser Aluminum and Nordic Semiconductor

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

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

Diversification Opportunities for Kaiser Aluminum and Nordic Semiconductor

-0.33

Correlation Coefficient

Kaiser Aluminum  Nordic Semiconductor

Very good diversification

The 3 months correlation between Kaiser and Nordic is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Nordic Semiconductor

Assuming the 90 days trading horizon Kaiser Aluminum is expected to under-perform the Nordic Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Kaiser Aluminum is 1.29 times less risky than Nordic Semiconductor. The stock trades about -0.5 of its potential returns per unit of risk. The Nordic Semiconductor ASA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  831.00  in Nordic Semiconductor ASA on September 25, 2024 and sell it today you would lose (6.00) from holding Nordic Semiconductor ASA or give up 0.72% of portfolio value over 90 days.

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

Kaiser Aluminum  vs.  Nordic Semiconductor ASA

Kaiser Aluminum

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kaiser Aluminum 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 Kaiser Aluminum and Nordic Semiconductor

The main advantage of trading using opposite Kaiser Aluminum and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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 Kaiser Aluminum 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.