Correlation Between Nordic Semiconductor and NOV

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

Diversification Opportunities for Nordic Semiconductor and NOV

-0.2

Correlation Coefficient

Nordic Semiconductor  NOV

Good diversification

The 3 months correlation between Nordic and NOV is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc 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 NOV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOV Inc has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and NOV go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and NOV

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to generate 0.77 times more return on investment than NOV. However, Nordic Semiconductor ASA is 1.3 times less risky than NOV. It trades about 1.0 of its potential returns per unit of risk. NOV Inc is currently generating about 0.5 per unit of risk. If you would invest  825.00  in Nordic Semiconductor ASA on October 23, 2024 and sell it today you would earn a total of  160.00  from holding Nordic Semiconductor ASA or generate 19.39% 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.  NOV Inc

Nordic Semiconductor ASA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nordic Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

NOV Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NOV may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nordic Semiconductor and NOV

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

The idea behind Nordic Semiconductor ASA and NOV Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.