Correlation Between Nordic Semiconductor and NETGEAR

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

Diversification Opportunities for Nordic Semiconductor and NETGEAR

-0.14

Correlation Coefficient

Nordic Semiconductor  NETGEAR

Good diversification

The 3 months correlation between Nordic and NETGEAR is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and NETGEAR go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and NETGEAR

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the NETGEAR. In addition to that, Nordic Semiconductor is 1.43 times more volatile than NETGEAR. It trades about -0.01 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.04 per unit of volatility. If you would invest  1,903  in NETGEAR on September 27, 2024 and sell it today you would earn a total of  981.00  from holding NETGEAR or generate 51.55% return on investment over 90 days.

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

Nordic Semiconductor ASA  vs.  NETGEAR

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.

NETGEAR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic Semiconductor and NETGEAR

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

The idea behind Nordic Semiconductor ASA and NETGEAR 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.