Correlation Between BRP and Nordic Semiconductor

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

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

Diversification Opportunities for BRP and Nordic Semiconductor

-0.26

Correlation Coefficient

BRP  Nordic Semiconductor

Very good diversification

The 3 months correlation between BRP and Nordic is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc 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 BRP 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 BRP Inc 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 BRP i.e., BRP and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between BRP and Nordic Semiconductor

Given the investment horizon of 90 days BRP Inc is expected to under-perform the Nordic Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 1.32 times less risky than Nordic Semiconductor. The stock trades about -0.11 of its potential returns per unit of risk. The Nordic Semiconductor ASA is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,017  in Nordic Semiconductor ASA on September 30, 2024 and sell it today you would lose (162.00) from holding Nordic Semiconductor ASA or give up 15.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.97%
Values	Daily Returns

BRP Inc  vs.  Nordic Semiconductor ASA

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRP Inc 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 very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 BRP and Nordic Semiconductor

The main advantage of trading using opposite BRP and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP 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 BRP Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.