Correlation Between BCULC and Nordic Semiconductor

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Can any of the company-specific risk be diversified away by investing in both BCULC 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 BCULC and Nordic Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCULC 35 15 FEB 29 and Nordic Semiconductor ASA, you can compare the effects of market volatilities on BCULC 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 BCULC with a short position of Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCULC and Nordic Semiconductor.

Diversification Opportunities for BCULC and Nordic Semiconductor

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between BCULC and Nordic is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding BCULC 35 15 FEB 29 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 BCULC 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 BCULC 35 15 FEB 29 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 BCULC i.e., BCULC and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between BCULC and Nordic Semiconductor

Assuming the 90 days trading horizon BCULC 35 15 FEB 29 is expected to generate 0.25 times more return on investment than Nordic Semiconductor. However, BCULC 35 15 FEB 29 is 4.05 times less risky than Nordic Semiconductor. It trades about 0.03 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.01 per unit of risk. If you would invest  8,838  in BCULC 35 15 FEB 29 on September 28, 2024 and sell it today you would earn a total of  312.00  from holding BCULC 35 15 FEB 29 or generate 3.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy27.36%
ValuesDaily Returns

BCULC 35 15 FEB 29  vs.  Nordic Semiconductor ASA

 Performance 
       Timeline  
BCULC 35 15 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BCULC 35 15 FEB 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for BCULC 35 15 FEB 29 investors.
Nordic Semiconductor ASA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

BCULC and Nordic Semiconductor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BCULC and Nordic Semiconductor

The main advantage of trading using opposite BCULC and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCULC 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 BCULC 35 15 FEB 29 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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