Correlation Between KVH Industries and Nordic Semiconductor

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

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

Diversification Opportunities for KVH Industries and Nordic Semiconductor

-0.6

Correlation Coefficient

KVH Industries  Nordic Semiconductor

Excellent diversification

The 3 months correlation between KVH and Nordic is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries 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 KVH Industries 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 KVH Industries 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 KVH Industries i.e., KVH Industries and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between KVH Industries and Nordic Semiconductor

Given the investment horizon of 90 days KVH Industries is expected to under-perform the Nordic Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, KVH Industries is 1.16 times less risky than Nordic Semiconductor. The stock trades about -0.12 of its potential returns per unit of risk. The Nordic Semiconductor ASA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  873.00  in Nordic Semiconductor ASA on October 8, 2024 and sell it today you would earn a total of  27.00  from holding Nordic Semiconductor ASA or generate 3.09% return on investment over 90 days.

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

KVH Industries  vs.  Nordic Semiconductor ASA

KVH Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable basic indicators, Nordic Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KVH Industries and Nordic Semiconductor

The main advantage of trading using opposite KVH Industries and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KVH Industries 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 KVH Industries 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .