Correlation Between Nordic Semiconductor and IDEXX Laboratories

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

Diversification Opportunities for Nordic Semiconductor and IDEXX Laboratories

0.17

Correlation Coefficient

Nordic Semiconductor  IDEXX Laboratories

Average diversification

The 3 months correlation between Nordic and IDEXX is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and IDEXX Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEXX Laboratories 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 IDEXX Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEXX Laboratories has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and IDEXX Laboratories go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and IDEXX Laboratories

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the IDEXX Laboratories. In addition to that, Nordic Semiconductor is 2.17 times more volatile than IDEXX Laboratories. It trades about -0.01 of its total potential returns per unit of risk. IDEXX Laboratories is currently generating about -0.01 per unit of volatility. If you would invest  46,060  in IDEXX Laboratories on October 25, 2024 and sell it today you would lose (5,200) from holding IDEXX Laboratories or give up 11.29% of portfolio value over 90 days.

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

Nordic Semiconductor ASA  vs.  IDEXX Laboratories

Nordic Semiconductor ASA

Risk-Adjusted Performance

8 of 100

OK

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. Despite nearly fragile basic indicators, Nordic Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

IDEXX Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDEXX Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IDEXX Laboratories is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nordic Semiconductor and IDEXX Laboratories

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

The idea behind Nordic Semiconductor ASA and IDEXX Laboratories 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.