Correlation Between Nordic Semiconductor and Fevertree Drinks

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

Diversification Opportunities for Nordic Semiconductor and Fevertree Drinks

0.09

Correlation Coefficient

Nordic Semiconductor  Fevertree Drinks

Significant diversification

The 3 months correlation between Nordic and Fevertree is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Fevertree Drinks

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to generate 1.95 times more return on investment than Fevertree Drinks. However, Nordic Semiconductor is 1.95 times more volatile than Fevertree Drinks Plc. It trades about -0.04 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.29 per unit of risk. If you would invest  905.00  in Nordic Semiconductor ASA on September 27, 2024 and sell it today you would lose (50.00) from holding Nordic Semiconductor ASA or give up 5.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Nordic Semiconductor ASA  vs.  Fevertree Drinks Plc

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.

Fevertree Drinks Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fevertree Drinks Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nordic Semiconductor and Fevertree Drinks

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

The idea behind Nordic Semiconductor ASA and Fevertree Drinks Plc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.