Correlation Between Nordic Semiconductor and Tata Steel

Can any of the company-specific risk be diversified away by investing in both Nordic Semiconductor and Tata Steel 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 Tata Steel 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 Tata Steel Limited, you can compare the effects of market volatilities on Nordic Semiconductor and Tata Steel 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 Tata Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordic Semiconductor and Tata Steel.

Diversification Opportunities for Nordic Semiconductor and Tata Steel

0.16

Correlation Coefficient

Nordic Semiconductor  Tata Steel

Average diversification

The 3 months correlation between Nordic and Tata is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Tata Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Steel Limited 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 Tata Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Steel Limited has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Tata Steel go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Tata Steel

Assuming the 90 days trading horizon Nordic Semiconductor ASA is expected to under-perform the Tata Steel. In addition to that, Nordic Semiconductor is 1.72 times more volatile than Tata Steel Limited. It trades about -0.11 of its total potential returns per unit of risk. Tata Steel Limited is currently generating about -0.02 per unit of volatility. If you would invest  1,785  in Tata Steel Limited on September 4, 2024 and sell it today you would lose (75.00) from holding Tata Steel Limited or give up 4.2% of portfolio value over 90 days.

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

Nordic Semiconductor ASA  vs.  Tata Steel Limited

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.

Tata Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Tata Steel is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nordic Semiconductor and Tata Steel

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

The idea behind Nordic Semiconductor ASA and Tata Steel Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.