Correlation Between Nordic Semiconductor and STMICROELECTRONICS

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

Diversification Opportunities for Nordic Semiconductor and STMICROELECTRONICS

0.92

Correlation Coefficient

Nordic Semiconductor  STMICROELECTRONICS

Almost no diversification

The 3 months correlation between Nordic and STMICROELECTRONICS is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Semiconductor ASA and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of Nordic Semiconductor i.e., Nordic Semiconductor and STMICROELECTRONICS go up and down completely randomly.

Pair Corralation between Nordic Semiconductor and STMICROELECTRONICS

Assuming the 90 days horizon Nordic Semiconductor ASA is expected to generate 1.39 times more return on investment than STMICROELECTRONICS. However, Nordic Semiconductor is 1.39 times more volatile than STMICROELECTRONICS. It trades about 0.01 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.03 per unit of risk. If you would invest  1,325  in Nordic Semiconductor ASA on April 20, 2025 and sell it today you would lose (143.00) from holding Nordic Semiconductor ASA or give up 10.79% of portfolio value over 90 days.

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

Nordic Semiconductor ASA  vs.  STMICROELECTRONICS

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 15 (%) 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.

STMICROELECTRONICS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMICROELECTRONICS are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, STMICROELECTRONICS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic Semiconductor and STMICROELECTRONICS

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

The idea behind Nordic Semiconductor ASA and STMICROELECTRONICS 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.