Correlation Between LPL Financial and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both LPL Financial 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 LPL Financial and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LPL Financial Holdings and NXP Semiconductors NV, you can compare the effects of market volatilities on LPL Financial 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 LPL Financial with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of LPL Financial and NXP Semiconductors.
Diversification Opportunities for LPL Financial and NXP Semiconductors
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LPL and NXP is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding LPL Financial Holdings and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and LPL Financial 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 LPL Financial Holdings 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 LPL Financial i.e., LPL Financial and NXP Semiconductors go up and down completely randomly.
Pair Corralation between LPL Financial and NXP Semiconductors
Assuming the 90 days trading horizon LPL Financial Holdings is expected to generate 0.93 times more return on investment than NXP Semiconductors. However, LPL Financial Holdings is 1.07 times less risky than NXP Semiconductors. It trades about 0.22 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 11,162 in LPL Financial Holdings on November 3, 2024 and sell it today you would earn a total of 761.00 from holding LPL Financial Holdings or generate 6.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LPL Financial Holdings vs. NXP Semiconductors NV
Performance |
| Timeline |
| LPL Financial Holdings |
| NXP Semiconductors |
LPL Financial and NXP Semiconductors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LPL Financial and NXP Semiconductors
The main advantage of trading using opposite LPL Financial and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPL Financial 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.| LPL Financial vs. Taiwan Semiconductor Manufacturing | LPL Financial vs. Apple Inc | LPL Financial vs. Alibaba Group Holding | LPL Financial vs. Microsoft |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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