Correlation Between Nordic Semiconductor and PepsiCo

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

Diversification Opportunities for Nordic Semiconductor and PepsiCo

0.12

Correlation Coefficient

Nordic Semiconductor  PepsiCo

Average diversification

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

Pair Corralation between Nordic Semiconductor and PepsiCo

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the PepsiCo. In addition to that, Nordic Semiconductor is 4.34 times more volatile than PepsiCo. It trades about -0.01 of its total potential returns per unit of risk. PepsiCo is currently generating about -0.01 per unit of volatility. If you would invest  16,503  in PepsiCo on October 4, 2024 and sell it today you would lose (1,487) from holding PepsiCo or give up 9.01% of portfolio value over 90 days.

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

Nordic Semiconductor ASA  vs.  PepsiCo

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.

PepsiCo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PepsiCo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Nordic Semiconductor and PepsiCo

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

The idea behind Nordic Semiconductor ASA and PepsiCo 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 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.