Correlation Between Nordic Semiconductor and Morrow Bank

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

Diversification Opportunities for Nordic Semiconductor and Morrow Bank

0.05

Correlation Coefficient

Nordic Semiconductor  Morrow Bank

Significant diversification

The 3 months correlation between Nordic and Morrow is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Morrow Bank ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morrow Bank 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 Morrow Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morrow Bank ASA has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Morrow Bank go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Morrow Bank

Assuming the 90 days trading horizon Nordic Semiconductor ASA is expected to generate 1.6 times more return on investment than Morrow Bank. However, Nordic Semiconductor is 1.6 times more volatile than Morrow Bank ASA. It trades about 0.16 of its potential returns per unit of risk. Morrow Bank ASA is currently generating about 0.08 per unit of risk. If you would invest  9,922  in Nordic Semiconductor ASA on December 21, 2024 and sell it today you would earn a total of  3,623  from holding Nordic Semiconductor ASA or generate 36.51% 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.  Morrow Bank 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 12 (%) 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.

Morrow Bank ASA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morrow Bank ASA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Morrow Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nordic Semiconductor and Morrow Bank

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

The idea behind Nordic Semiconductor ASA and Morrow Bank 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.