Correlation Between Nordic Semiconductor and Pyrum Innovations

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

Diversification Opportunities for Nordic Semiconductor and Pyrum Innovations

0.42

Correlation Coefficient

Nordic Semiconductor  Pyrum Innovations

Very weak diversification

The 3 months correlation between Nordic and Pyrum is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Pyrum Innovations AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pyrum Innovations 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 Pyrum Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pyrum Innovations has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Pyrum Innovations go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Pyrum Innovations

Assuming the 90 days trading horizon Nordic Semiconductor ASA is expected to generate 1.41 times more return on investment than Pyrum Innovations. However, Nordic Semiconductor is 1.41 times more volatile than Pyrum Innovations AG. It trades about 0.49 of its potential returns per unit of risk. Pyrum Innovations AG is currently generating about 0.24 per unit of risk. If you would invest  9,922  in Nordic Semiconductor ASA on October 24, 2024 and sell it today you would earn a total of  2,078  from holding Nordic Semiconductor ASA or generate 20.94% return on investment over 90 days.

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

Nordic Semiconductor ASA  vs.  Pyrum Innovations AG

Nordic Semiconductor ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Nordic Semiconductor disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pyrum Innovations

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pyrum Innovations AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Pyrum Innovations is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nordic Semiconductor and Pyrum Innovations

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

The idea behind Nordic Semiconductor ASA and Pyrum Innovations AG 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.