Correlation Between KLA Tencor and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both KLA Tencor 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 KLA Tencor and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and NXP Semiconductors NV, you can compare the effects of market volatilities on KLA Tencor 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 KLA Tencor with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and NXP Semiconductors.
Diversification Opportunities for KLA Tencor and NXP Semiconductors
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KLA and NXP is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and KLA Tencor 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 KLA Tencor 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 KLA Tencor i.e., KLA Tencor and NXP Semiconductors go up and down completely randomly.
Pair Corralation between KLA Tencor and NXP Semiconductors
Given the investment horizon of 90 days KLA Tencor is expected to under-perform the NXP Semiconductors. In addition to that, KLA Tencor is 1.34 times more volatile than NXP Semiconductors NV. It trades about -0.07 of its total potential returns per unit of risk. NXP Semiconductors NV is currently generating about -0.02 per unit of volatility. If you would invest 23,510 in NXP Semiconductors NV on August 31, 2024 and sell it today you would lose (857.00) from holding NXP Semiconductors NV or give up 3.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KLA Tencor vs. NXP Semiconductors NV
Performance |
| Timeline |
| KLA Tencor |
| NXP Semiconductors |
KLA Tencor and NXP Semiconductors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KLA Tencor and NXP Semiconductors
The main advantage of trading using opposite KLA Tencor and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor 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.| KLA Tencor vs. Applied Materials | KLA Tencor vs. ASML Holding NV | KLA Tencor vs. Axcelis Technologies | KLA Tencor vs. Teradyne |
| NXP Semiconductors vs. Analog Devices | NXP Semiconductors vs. Qualcomm Incorporated | NXP Semiconductors vs. Broadcom | NXP Semiconductors vs. Microchip Technology |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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