Correlation Between Nordic Semiconductor and PennantPark Investment

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

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

Diversification Opportunities for Nordic Semiconductor and PennantPark Investment

-0.38

Correlation Coefficient

Nordic Semiconductor  PennantPark Investment

Very good diversification

The 3 months correlation between Nordic and PennantPark is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment and Nordic Semiconductor 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 Nordic Semiconductor ASA are associated (or correlated) with PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and PennantPark Investment go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and PennantPark Investment

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the PennantPark Investment. In addition to that, Nordic Semiconductor is 1.15 times more volatile than PennantPark Investment. It trades about -0.04 of its total potential returns per unit of risk. PennantPark Investment is currently generating about 0.23 per unit of volatility. If you would invest  625.00  in PennantPark Investment on October 5, 2024 and sell it today you would earn a total of  38.00  from holding PennantPark Investment or generate 6.08% return on investment over 90 days.

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

Nordic Semiconductor ASA  vs.  PennantPark Investment

Nordic Semiconductor ASA

Risk-Adjusted Performance

0 of 100

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.

PennantPark Investment

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days PennantPark Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, PennantPark Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nordic Semiconductor and PennantPark Investment

The main advantage of trading using opposite Nordic Semiconductor and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordic Semiconductor position performs unexpectedly, PennantPark Investment 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 PennantPark Investment will offset losses from the drop in PennantPark Investment's long position.

The idea behind Nordic Semiconductor ASA and PennantPark Investment 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.