Correlation Between Alphawave and Nordic Semiconductor

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

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

Diversification Opportunities for Alphawave and Nordic Semiconductor

0.46

Correlation Coefficient

Alphawave  Nordic Semiconductor

Very weak diversification

The 3 months correlation between Alphawave and Nordic is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alphawave IP Group 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 Alphawave 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 Alphawave IP Group 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 Alphawave i.e., Alphawave and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between Alphawave and Nordic Semiconductor

Assuming the 90 days horizon Alphawave IP Group is expected to under-perform the Nordic Semiconductor. In addition to that, Alphawave is 2.86 times more volatile than Nordic Semiconductor ASA. It trades about -0.21 of its total potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.34 per unit of volatility. If you would invest  986.00  in Nordic Semiconductor ASA on September 29, 2024 and sell it today you would lose (131.00) from holding Nordic Semiconductor ASA or give up 13.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Alphawave IP Group  vs.  Nordic Semiconductor ASA

Alphawave IP Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alphawave IP Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 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.

Pair Trading with Alphawave and Nordic Semiconductor

The main advantage of trading using opposite Alphawave and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphawave 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 Alphawave IP Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.