Correlation Between Samsung Electronics and Nordic Semiconductor

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

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

Diversification Opportunities for Samsung Electronics and Nordic Semiconductor

0.48

Correlation Coefficient

Samsung Electronics  Nordic Semiconductor

Very weak diversification

The 3 months correlation between Samsung and Nordic is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co 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 Samsung Electronics 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 Samsung Electronics Co 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 Samsung Electronics i.e., Samsung Electronics and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between Samsung Electronics and Nordic Semiconductor

Assuming the 90 days trading horizon Samsung Electronics is expected to generate 16.66 times less return on investment than Nordic Semiconductor. But when comparing it to its historical volatility, Samsung Electronics Co is 1.95 times less risky than Nordic Semiconductor. It trades about 0.02 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  10,113  in Nordic Semiconductor ASA on December 4, 2024 and sell it today you would earn a total of  3,762  from holding Nordic Semiconductor ASA or generate 37.2% return on investment over 90 days.

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

Samsung Electronics Co  vs.  Nordic Semiconductor ASA

Samsung Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Electronics Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Samsung Electronics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nordic Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and Nordic Semiconductor

The main advantage of trading using opposite Samsung Electronics and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics 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 Samsung Electronics Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..