Correlation Between Nordic Semiconductor and MaxLinear

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

Diversification Opportunities for Nordic Semiconductor and MaxLinear

-0.29

Correlation Coefficient

Nordic Semiconductor  MaxLinear

Very good diversification

The 3 months correlation between Nordic and MaxLinear is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear 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 MaxLinear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MaxLinear has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and MaxLinear go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and MaxLinear

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the MaxLinear. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nordic Semiconductor ASA is 1.05 times less risky than MaxLinear. The pink sheet trades about -0.01 of its potential returns per unit of risk. The MaxLinear is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,322  in MaxLinear on September 25, 2024 and sell it today you would lose (1,304) from holding MaxLinear or give up 39.25% of portfolio value over 90 days.

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

Nordic Semiconductor ASA  vs.  MaxLinear

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.

MaxLinear

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MaxLinear are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, MaxLinear disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic Semiconductor and MaxLinear

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

The idea behind Nordic Semiconductor ASA and MaxLinear 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.