Correlation Between Nordic Semiconductor and NTT DATA

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

Diversification Opportunities for Nordic Semiconductor and NTT DATA

-0.03

Correlation Coefficient

Nordic Semiconductor  NTT DATA

Good diversification

The 3 months correlation between Nordic and NTT is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and NTT DATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTT DATA 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 NTT DATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTT DATA has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and NTT DATA go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and NTT DATA

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to generate 1.92 times more return on investment than NTT DATA. However, Nordic Semiconductor is 1.92 times more volatile than NTT DATA . It trades about 0.12 of its potential returns per unit of risk. NTT DATA is currently generating about -0.03 per unit of risk. If you would invest  873.00  in Nordic Semiconductor ASA on December 19, 2024 and sell it today you would earn a total of  242.00  from holding Nordic Semiconductor ASA or generate 27.72% 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.  NTT DATA

Nordic Semiconductor ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 9 (%) 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.

NTT DATA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NTT DATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NTT DATA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nordic Semiconductor and NTT DATA

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

The idea behind Nordic Semiconductor ASA and NTT DATA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.