Correlation Between Nordic Semiconductor and Sandfire Resources

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

Diversification Opportunities for Nordic Semiconductor and Sandfire Resources

-0.47

Correlation Coefficient

Nordic Semiconductor  Sandfire Resources

Very good diversification

The 3 months correlation between Nordic and Sandfire is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Sandfire Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources 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 Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Sandfire Resources go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Sandfire Resources

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to under-perform the Sandfire Resources. In addition to that, Nordic Semiconductor is 1.9 times more volatile than Sandfire Resources Limited. It trades about -0.13 of its total potential returns per unit of risk. Sandfire Resources Limited is currently generating about -0.05 per unit of volatility. If you would invest  600.00  in Sandfire Resources Limited on September 24, 2024 and sell it today you would lose (45.00) from holding Sandfire Resources Limited or give up 7.5% of portfolio value over 90 days.

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

Nordic Semiconductor ASA  vs.  Sandfire Resources 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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sandfire Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandfire Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Pair Trading with Nordic Semiconductor and Sandfire Resources

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

The idea behind Nordic Semiconductor ASA and Sandfire Resources 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..