Correlation Between Air Products and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both Air Products and NXP Semiconductors 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 Air Products and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products and and NXP Semiconductors NV, you can compare the effects of market volatilities on Air Products and NXP Semiconductors 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 Air Products with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and NXP Semiconductors.
Diversification Opportunities for Air Products and NXP Semiconductors
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Air and NXP is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and Air Products 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 Air Products and are associated (or correlated) with NXP Semiconductors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXP Semiconductors has no effect on the direction of Air Products i.e., Air Products and NXP Semiconductors go up and down completely randomly.
Pair Corralation between Air Products and NXP Semiconductors
Assuming the 90 days trading horizon Air Products and is expected to under-perform the NXP Semiconductors. But the stock apears to be less risky and, when comparing its historical volatility, Air Products and is 1.22 times less risky than NXP Semiconductors. The stock trades about -0.34 of its potential returns per unit of risk. The NXP Semiconductors NV is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 65,934 in NXP Semiconductors NV on October 12, 2024 and sell it today you would lose (284.00) from holding NXP Semiconductors NV or give up 0.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products and vs. NXP Semiconductors NV
Performance |
| Timeline |
| Air Products |
| NXP Semiconductors |
Air Products and NXP Semiconductors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and NXP Semiconductors
The main advantage of trading using opposite Air Products and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, NXP Semiconductors 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 NXP Semiconductors will offset losses from the drop in NXP Semiconductors' long position.| Air Products vs. Taiwan Semiconductor Manufacturing | Air Products vs. Apple Inc | Air Products vs. Alibaba Group Holding | Air Products vs. Banco Santander Chile |
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Check out your portfolio center.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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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