Correlation Between Nordic Semiconductor and Principal Financial

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

Diversification Opportunities for Nordic Semiconductor and Principal Financial

0.24

Correlation Coefficient

Nordic Semiconductor  Principal Financial

Modest diversification

The 3 months correlation between Nordic and Principal is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial 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 Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and Principal Financial go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and Principal Financial

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to generate 1.64 times more return on investment than Principal Financial. However, Nordic Semiconductor is 1.64 times more volatile than Principal Financial Group. It trades about 0.19 of its potential returns per unit of risk. Principal Financial Group is currently generating about 0.06 per unit of risk. If you would invest  937.00  in Nordic Semiconductor ASA on April 23, 2025 and sell it today you would earn a total of  296.00  from holding Nordic Semiconductor ASA or generate 31.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Nordic Semiconductor ASA  vs.  Principal Financial Group

Nordic Semiconductor ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nordic Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

Principal Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Principal Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nordic Semiconductor and Principal Financial

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

The idea behind Nordic Semiconductor ASA and Principal Financial Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.