Correlation Between Norwegian Air and Nordic Semiconductor

Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Nordic Semiconductor 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 Norwegian Air and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Norwegian Air Shuttle and Nordic Semiconductor ASA, you can compare the effects of market volatilities on Norwegian Air and Nordic Semiconductor 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 Norwegian Air with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Nordic Semiconductor.

Diversification Opportunities for Norwegian Air and Nordic Semiconductor

0.21

Correlation Coefficient

Norwegian Air  Nordic Semiconductor

Modest diversification

The 3 months correlation between Norwegian and Nordic is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Nordic Semiconductor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Semiconductor ASA and Norwegian Air 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 Norwegian Air Shuttle are associated (or correlated) with Nordic Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Semiconductor ASA has no effect on the direction of Norwegian Air i.e., Norwegian Air and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between Norwegian Air and Nordic Semiconductor

Assuming the 90 days horizon Norwegian Air is expected to generate 3.3 times less return on investment than Nordic Semiconductor. But when comparing it to its historical volatility, Norwegian Air Shuttle is 1.39 times less risky than Nordic Semiconductor. It trades about 0.07 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  836.00  in Nordic Semiconductor ASA on December 2, 2024 and sell it today you would earn a total of  344.00  from holding Nordic Semiconductor ASA or generate 41.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Norwegian Air Shuttle  vs.  Nordic Semiconductor ASA

Norwegian Air Shuttle

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Air Shuttle are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Norwegian Air may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nordic Semiconductor ASA

Risk-Adjusted Performance

Good

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

Pair Trading with Norwegian Air and Nordic Semiconductor

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

The idea behind Norwegian Air Shuttle and Nordic Semiconductor ASA 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 CEOs Directory module to screen CEOs from public companies around the world.