Correlation Between Bank of America and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and NXP Semiconductors NV, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and NXP Semiconductors.
Diversification Opportunities for Bank of America and NXP Semiconductors
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and NXP is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and NXP Semiconductors go up and down completely randomly.
Pair Corralation between Bank of America and NXP Semiconductors
Assuming the 90 days trading horizon Bank of America is expected to generate 1.0 times more return on investment than NXP Semiconductors. However, Bank of America is 1.0 times more volatile than NXP Semiconductors NV. It trades about 0.0 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about -0.1 per unit of risk. If you would invest 6,828 in Bank of America on November 3, 2024 and sell it today you would lose (11.00) from holding Bank of America or give up 0.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. NXP Semiconductors NV
Performance |
| Timeline |
| Bank of America |
| NXP Semiconductors |
Bank of America and NXP Semiconductors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and NXP Semiconductors
The main advantage of trading using opposite Bank of America and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. JPMorgan Chase Co | Bank of America vs. Citigroup | Bank of America vs. Pentair plc | Bank of America vs. Cisco Systems |
| NXP Semiconductors vs. United States Steel | NXP Semiconductors vs. Roper Technologies, | NXP Semiconductors vs. Take Two Interactive Software | NXP Semiconductors vs. Seagate Technology Holdings |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Stocks Directory Find actively traded stocks across global markets | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |