Correlation Between Nordic Semiconductor and Itera ASA

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

Diversification Opportunities for Nordic Semiconductor and Itera ASA

0.17

Correlation Coefficient

Nordic Semiconductor  Itera ASA

Average diversification

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

Pair Corralation between Nordic Semiconductor and Itera ASA

Assuming the 90 days trading horizon Nordic Semiconductor ASA is expected to generate 2.0 times more return on investment than Itera ASA. However, Nordic Semiconductor is 2.0 times more volatile than Itera ASA. It trades about 0.19 of its potential returns per unit of risk. Itera ASA is currently generating about -0.04 per unit of risk. If you would invest  11,400  in Nordic Semiconductor ASA on December 2, 2024 and sell it today you would earn a total of  2,345  from holding Nordic Semiconductor ASA or generate 20.57% return on investment over 90 days.

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

Nordic Semiconductor ASA  vs.  Itera ASA

Nordic Semiconductor ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Nordic Semiconductor disclosed solid returns over the last few months and may actually be approaching a breakup point.

Itera ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Itera ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Itera ASA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nordic Semiconductor and Itera ASA

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

The idea behind Nordic Semiconductor ASA and Itera ASA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.