Correlation Between NXP Semiconductors and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both NXP Semiconductors and Eastman Chemical 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 NXP Semiconductors and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NXP Semiconductors NV and Eastman Chemical, you can compare the effects of market volatilities on NXP Semiconductors and Eastman Chemical 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 NXP Semiconductors with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXP Semiconductors and Eastman Chemical.
Diversification Opportunities for NXP Semiconductors and Eastman Chemical
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NXP and Eastman is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and NXP Semiconductors 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 NXP Semiconductors NV are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and Eastman Chemical go up and down completely randomly.
Pair Corralation between NXP Semiconductors and Eastman Chemical
Assuming the 90 days trading horizon NXP Semiconductors NV is expected to under-perform the Eastman Chemical. In addition to that, NXP Semiconductors is 2.48 times more volatile than Eastman Chemical. It trades about -0.29 of its total potential returns per unit of risk. Eastman Chemical is currently generating about 0.21 per unit of volatility. If you would invest 27,540 in Eastman Chemical on November 7, 2024 and sell it today you would earn a total of 860.00 from holding Eastman Chemical or generate 3.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
NXP Semiconductors NV vs. Eastman Chemical
Performance |
| Timeline |
| NXP Semiconductors |
| Eastman Chemical |
NXP Semiconductors and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NXP Semiconductors and Eastman Chemical
The main advantage of trading using opposite NXP Semiconductors and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXP Semiconductors position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.| NXP Semiconductors vs. Nordon Indstrias Metalrgicas | NXP Semiconductors vs. United Natural Foods, | NXP Semiconductors vs. Hospital Mater Dei | NXP Semiconductors vs. Teladoc Health |
| Eastman Chemical vs. Spotify Technology SA | Eastman Chemical vs. Monster Beverage | Eastman Chemical vs. Roper Technologies, | Eastman Chemical vs. United Rentals |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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