Correlation Between Microsoft and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and NXP Semiconductors NV, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and NXP Semiconductors.
Diversification Opportunities for Microsoft and NXP Semiconductors
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and NXP is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and NXP Semiconductors go up and down completely randomly.
Pair Corralation between Microsoft and NXP Semiconductors
Assuming the 90 days trading horizon Microsoft is expected to generate 0.7 times more return on investment than NXP Semiconductors. However, Microsoft is 1.43 times less risky than NXP Semiconductors. It trades about 0.13 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about -0.29 per unit of risk. If you would invest 40,700 in Microsoft on September 27, 2024 and sell it today you would earn a total of 1,130 from holding Microsoft or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. NXP Semiconductors NV
Performance |
| Timeline |
| Microsoft |
| NXP Semiconductors |
Microsoft and NXP Semiconductors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and NXP Semiconductors
The main advantage of trading using opposite Microsoft and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Ultra Clean Holdings | Microsoft vs. DXC Technology Co | Microsoft vs. HK Electric Investments | Microsoft vs. WisdomTree Investments |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |