Correlation Between Nordic Semiconductor and Archer Materials

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

Diversification Opportunities for Nordic Semiconductor and Archer Materials

-0.31

Correlation Coefficient

Nordic Semiconductor  Archer Materials

Very good diversification

The 3 months correlation between Nordic and Archer is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Archer Materials Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Materials 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 Archer Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Materials has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Archer Materials go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Archer Materials

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the Archer Materials. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nordic Semiconductor ASA is 2.04 times less risky than Archer Materials. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Archer Materials Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Archer Materials Limited on October 4, 2024 and sell it today you would lose (5.00) from holding Archer Materials Limited or give up 11.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Nordic Semiconductor ASA  vs.  Archer Materials Limited

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 fairly strong fundamental indicators, Nordic Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Archer Materials

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Materials Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Archer Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic Semiconductor and Archer Materials

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

The idea behind Nordic Semiconductor ASA and Archer Materials Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.