Correlation Between Nordic Mining and Nordic Semiconductor

Can any of the company-specific risk be diversified away by investing in both Nordic Mining and Nordic Semiconductor 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 Mining and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nordic Mining ASA and Nordic Semiconductor ASA, you can compare the effects of market volatilities on Nordic Mining and Nordic Semiconductor 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 Mining with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Mining and Nordic Semiconductor.

Diversification Opportunities for Nordic Mining and Nordic Semiconductor

-0.64

Correlation Coefficient

Nordic Mining  Nordic Semiconductor

Excellent diversification

The 3 months correlation between Nordic and Nordic is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Mining ASA and Nordic Semiconductor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Semiconductor ASA and Nordic Mining 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 Mining ASA are associated (or correlated) with Nordic Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Semiconductor ASA has no effect on the direction of Nordic Mining i.e., Nordic Mining and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between Nordic Mining and Nordic Semiconductor

Assuming the 90 days trading horizon Nordic Mining ASA is expected to under-perform the Nordic Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Nordic Mining ASA is 1.03 times less risky than Nordic Semiconductor. The stock trades about -0.55 of its potential returns per unit of risk. The Nordic Semiconductor ASA is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  10,185  in Nordic Semiconductor ASA on October 27, 2024 and sell it today you would earn a total of  1,615  from holding Nordic Semiconductor ASA or generate 15.86% return on investment over 90 days.

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

Nordic Mining ASA  vs.  Nordic Semiconductor ASA

Nordic Mining ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic Mining ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Nordic Semiconductor ASA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Nordic Semiconductor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nordic Mining and Nordic Semiconductor

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

The idea behind Nordic Mining ASA and Nordic Semiconductor 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.