Correlation Between London Security and Nordic Semiconductor

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

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

Diversification Opportunities for London Security and Nordic Semiconductor

-0.05

Correlation Coefficient

London Security  Nordic Semiconductor

Good diversification

The 3 months correlation between London and Nordic is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc 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 London Security 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 London Security Plc 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 London Security i.e., London Security and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between London Security and Nordic Semiconductor

If you would invest  10,328  in Nordic Semiconductor ASA on October 13, 2024 and sell it today you would earn a total of  615.00  from holding Nordic Semiconductor ASA or generate 5.95% return on investment over 90 days.

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

London Security Plc  vs.  Nordic Semiconductor ASA

London Security Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days London Security Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Nordic Semiconductor ASA

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nordic Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with London Security and Nordic Semiconductor

The main advantage of trading using opposite London Security and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security 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 London Security Plc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.