Correlation Between British American and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and NXP Semiconductors NV, you can compare the effects of market volatilities on British American 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 British American with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and NXP Semiconductors.
Diversification Opportunities for British American and NXP Semiconductors
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and NXP is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and British American 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 British American Tobacco 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 British American i.e., British American and NXP Semiconductors go up and down completely randomly.
Pair Corralation between British American and NXP Semiconductors
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.32 times more return on investment than NXP Semiconductors. However, British American Tobacco is 3.1 times less risky than NXP Semiconductors. It trades about 0.33 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.0 per unit of risk. If you would invest 3,983 in British American Tobacco on August 23, 2024 and sell it today you would earn a total of 289.00 from holding British American Tobacco or generate 7.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. NXP Semiconductors NV
Performance |
| Timeline |
| British American Tobacco |
| NXP Semiconductors |
British American and NXP Semiconductors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and NXP Semiconductors
The main advantage of trading using opposite British American and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. BTG Pactual Logstica | British American vs. Plano Plano Desenvolvimento | British American vs. Companhia Habitasul de | British American vs. The Procter Gamble |
| NXP Semiconductors vs. Broadcom | NXP Semiconductors vs. Intel | NXP Semiconductors vs. Micron Technology | NXP Semiconductors vs. STMicroelectronics NV |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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