Correlation Between Nordic Semiconductor and Church Dwight

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

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

Diversification Opportunities for Nordic Semiconductor and Church Dwight

-0.28

Correlation Coefficient

Nordic Semiconductor  Church Dwight

Very good diversification

The 3 months correlation between Nordic and Church is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Church Dwight Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Church Dwight and Nordic Semiconductor 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 Nordic Semiconductor ASA are associated (or correlated) with Church Dwight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Church Dwight has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Church Dwight go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Church Dwight

Assuming the 90 days trading horizon Nordic Semiconductor is expected to generate 3.32 times less return on investment than Church Dwight. In addition to that, Nordic Semiconductor is 3.86 times more volatile than Church Dwight Co. It trades about 0.01 of its total potential returns per unit of risk. Church Dwight Co is currently generating about 0.08 per unit of volatility. If you would invest  9,172  in Church Dwight Co on September 4, 2024 and sell it today you would earn a total of  1,928  from holding Church Dwight Co or generate 21.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.19%
Values	Daily Returns

Nordic Semiconductor ASA  vs.  Church Dwight Co

Nordic Semiconductor ASA

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Church Dwight

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Church Dwight Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Church Dwight is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nordic Semiconductor and Church Dwight

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

The idea behind Nordic Semiconductor ASA and Church Dwight Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.