Correlation Between Nordic Semiconductor and Entravision Communications

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

Diversification Opportunities for Nordic Semiconductor and Entravision Communications

-0.57

Correlation Coefficient

Nordic Semiconductor  Entravision Communications

Excellent diversification

The 3 months correlation between Nordic and Entravision is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications 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 Entravision Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entravision Communications has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Entravision Communications go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Entravision Communications

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the Entravision Communications. In addition to that, Nordic Semiconductor is 1.21 times more volatile than Entravision Communications. It trades about -0.07 of its total potential returns per unit of risk. Entravision Communications is currently generating about 0.17 per unit of volatility. If you would invest  173.00  in Entravision Communications on September 15, 2024 and sell it today you would earn a total of  61.00  from holding Entravision Communications or generate 35.26% return on investment over 90 days.

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

Nordic Semiconductor ASA  vs.  Entravision Communications

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.

Entravision Communications

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Entravision Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic Semiconductor and Entravision Communications

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

The idea behind Nordic Semiconductor ASA and Entravision Communications 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.