Correlation Between Nordic Semiconductor and DATATEC

Can any of the company-specific risk be diversified away by investing in both Nordic Semiconductor and DATATEC 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 DATATEC 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 DATATEC LTD 2, you can compare the effects of market volatilities on Nordic Semiconductor and DATATEC 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 DATATEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Semiconductor and DATATEC.

Diversification Opportunities for Nordic Semiconductor and DATATEC

0.26

Correlation Coefficient

Nordic Semiconductor  DATATEC

Modest diversification

The 3 months correlation between Nordic and DATATEC is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and DATATEC LTD 2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATATEC LTD 2 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 DATATEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATATEC LTD 2 has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and DATATEC go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and DATATEC

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the DATATEC. In addition to that, Nordic Semiconductor is 1.33 times more volatile than DATATEC LTD 2. It trades about -0.01 of its total potential returns per unit of risk. DATATEC LTD 2 is currently generating about 0.05 per unit of volatility. If you would invest  299.00  in DATATEC LTD 2 on October 11, 2024 and sell it today you would earn a total of  193.00  from holding DATATEC LTD 2 or generate 64.55% return on investment over 90 days.

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

Nordic Semiconductor ASA  vs.  DATATEC LTD 2

Nordic Semiconductor ASA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Nordic Semiconductor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DATATEC LTD 2

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DATATEC LTD 2 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DATATEC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic Semiconductor and DATATEC

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

The idea behind Nordic Semiconductor ASA and DATATEC LTD 2 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 .