Correlation Between Nordic Semiconductor and Alphawave

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

Diversification Opportunities for Nordic Semiconductor and Alphawave

0.15

Correlation Coefficient

Nordic Semiconductor  Alphawave

Average diversification

The 3 months correlation between Nordic and Alphawave is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Alphawave IP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphawave IP Group 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 Alphawave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphawave IP Group has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Alphawave go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Alphawave

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the Alphawave. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nordic Semiconductor ASA is 1.23 times less risky than Alphawave. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Alphawave IP Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  135.00  in Alphawave IP Group on September 25, 2024 and sell it today you would lose (23.00) from holding Alphawave IP Group or give up 17.04% 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.  Alphawave IP Group

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.

Alphawave IP Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alphawave IP Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Pair Trading with Nordic Semiconductor and Alphawave

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

The idea behind Nordic Semiconductor ASA and Alphawave IP Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.