Correlation Between Intel and Nordic Semiconductor

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

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

Diversification Opportunities for Intel and Nordic Semiconductor

-0.66

Correlation Coefficient

Intel  Nordic Semiconductor

Excellent diversification

The 3 months correlation between Intel and Nordic is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Intel 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 Intel 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 Intel 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 Intel i.e., Intel and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between Intel and Nordic Semiconductor

Assuming the 90 days horizon Intel is expected to generate 0.72 times more return on investment than Nordic Semiconductor. However, Intel is 1.38 times less risky than Nordic Semiconductor. It trades about 0.08 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.12 per unit of risk. If you would invest  1,975  in Intel on August 31, 2024 and sell it today you would earn a total of  269.00  from holding Intel or generate 13.62% return on investment over 90 days.

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

Intel  vs.  Nordic Semiconductor ASA

Intel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Intel reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Intel and Nordic Semiconductor

The main advantage of trading using opposite Intel and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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 Intel 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.