Correlation Between INDOFOOD AGRI and Nordic Semiconductor

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

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

Diversification Opportunities for INDOFOOD AGRI and Nordic Semiconductor

-0.65

Correlation Coefficient

INDOFOOD AGRI  Nordic Semiconductor

Excellent diversification

The 3 months correlation between INDOFOOD and Nordic is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES 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 INDOFOOD AGRI 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 INDOFOOD AGRI RES 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 INDOFOOD AGRI i.e., INDOFOOD AGRI and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and Nordic Semiconductor

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to under-perform the Nordic Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, INDOFOOD AGRI RES is 1.61 times less risky than Nordic Semiconductor. The stock trades about -0.02 of its potential returns per unit of risk. The Nordic Semiconductor ASA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  825.00  in Nordic Semiconductor ASA on December 22, 2024 and sell it today you would earn a total of  328.00  from holding Nordic Semiconductor ASA or generate 39.76% return on investment over 90 days.

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

INDOFOOD AGRI RES  vs.  Nordic Semiconductor ASA

INDOFOOD AGRI RES

Risk-Adjusted Performance

Very Weak

Over the last 90 days INDOFOOD AGRI RES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, INDOFOOD AGRI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. Despite nearly fragile basic indicators, Nordic Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDOFOOD AGRI and Nordic Semiconductor

The main advantage of trading using opposite INDOFOOD AGRI and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI 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 INDOFOOD AGRI RES 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.