Correlation Between China Resources and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both China Resources 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 China Resources and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Resources Beer and NXP Semiconductors NV, you can compare the effects of market volatilities on China Resources 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 China Resources with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and NXP Semiconductors.
Diversification Opportunities for China Resources and NXP Semiconductors
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and NXP is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and China Resources 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 China Resources Beer 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 China Resources i.e., China Resources and NXP Semiconductors go up and down completely randomly.
Pair Corralation between China Resources and NXP Semiconductors
Assuming the 90 days horizon China Resources Beer is expected to under-perform the NXP Semiconductors. In addition to that, China Resources is 2.09 times more volatile than NXP Semiconductors NV. It trades about -0.28 of its total potential returns per unit of risk. NXP Semiconductors NV is currently generating about -0.15 per unit of volatility. If you would invest 21,100 in NXP Semiconductors NV on October 11, 2024 and sell it today you would lose (700.00) from holding NXP Semiconductors NV or give up 3.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Resources Beer vs. NXP Semiconductors NV
Performance |
| Timeline |
| China Resources Beer |
| NXP Semiconductors |
China Resources and NXP Semiconductors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Resources and NXP Semiconductors
The main advantage of trading using opposite China Resources and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Resources 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.| China Resources vs. Tower Semiconductor | China Resources vs. Playmates Toys Limited | China Resources vs. ULTRA CLEAN HLDGS | China Resources vs. ePlay Digital |
| NXP Semiconductors vs. Fevertree Drinks PLC | NXP Semiconductors vs. Gaztransport Technigaz SA | NXP Semiconductors vs. China Resources Beer | NXP Semiconductors vs. BROADWIND ENRGY |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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