Correlation Between Nordic Semiconductor and Ambev SA

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

Diversification Opportunities for Nordic Semiconductor and Ambev SA

0.08

Correlation Coefficient

Nordic Semiconductor  Ambev SA

Significant diversification

The 3 months correlation between Nordic and Ambev is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR 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 Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA ADR has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Ambev SA go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Ambev SA

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the Ambev SA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nordic Semiconductor ASA is 1.59 times less risky than Ambev SA. The pink sheet trades about -0.34 of its potential returns per unit of risk. The Ambev SA ADR is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  219.00  in Ambev SA ADR on September 27, 2024 and sell it today you would lose (29.00) from holding Ambev SA ADR or give up 13.24% of portfolio value over 90 days.

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

Nordic Semiconductor ASA  vs.  Ambev SA ADR

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. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ambev SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Nordic Semiconductor and Ambev SA

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

The idea behind Nordic Semiconductor ASA and Ambev SA ADR 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.

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.