Correlation Between WPLAU and Nordic Semiconductor

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

By analyzing existing cross correlation between WPLAU 365 05 MAR 25 and Nordic Semiconductor ASA, you can compare the effects of market volatilities on WPLAU 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 WPLAU with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPLAU and Nordic Semiconductor.

Diversification Opportunities for WPLAU and Nordic Semiconductor

-0.42

Correlation Coefficient

WPLAU  Nordic Semiconductor

Very good diversification

The 3 months correlation between WPLAU and Nordic is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding WPLAU 365 05 MAR 25 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 WPLAU 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 WPLAU 365 05 MAR 25 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 WPLAU i.e., WPLAU and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between WPLAU and Nordic Semiconductor

Assuming the 90 days trading horizon WPLAU is expected to generate 6.69 times less return on investment than Nordic Semiconductor. But when comparing it to its historical volatility, WPLAU 365 05 MAR 25 is 31.82 times less risky than Nordic Semiconductor. It trades about 0.13 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  933.00  in Nordic Semiconductor ASA on October 10, 2024 and sell it today you would earn a total of  21.00  from holding Nordic Semiconductor ASA or generate 2.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	54.84%
Values	Daily Returns

WPLAU 365 05 MAR 25  vs.  Nordic Semiconductor ASA

WPLAU 365 05

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WPLAU 365 05 MAR 25 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, WPLAU is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nordic Semiconductor ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nordic Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WPLAU and Nordic Semiconductor

The main advantage of trading using opposite WPLAU and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WPLAU 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 WPLAU 365 05 MAR 25 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.