Correlation Between Nordic Semiconductor and KLA Tencor

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

Diversification Opportunities for Nordic Semiconductor and KLA Tencor

0.12

Correlation Coefficient

Nordic Semiconductor  KLA Tencor

Average diversification

The 3 months correlation between Nordic and KLA is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor 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 KLA Tencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Tencor has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and KLA Tencor go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and KLA Tencor

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the KLA Tencor. In addition to that, Nordic Semiconductor is 1.01 times more volatile than KLA Tencor. It trades about -0.26 of its total potential returns per unit of risk. KLA Tencor is currently generating about -0.04 per unit of volatility. If you would invest  63,955  in KLA Tencor on September 23, 2024 and sell it today you would lose (1,018) from holding KLA Tencor or give up 1.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Nordic Semiconductor ASA  vs.  KLA Tencor

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.

KLA Tencor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLA Tencor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Nordic Semiconductor and KLA Tencor

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

The idea behind Nordic Semiconductor ASA and KLA Tencor 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.