Correlation Between NXP Semiconductors and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both NXP Semiconductors and STMicroelectronics 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 STMicroelectronics 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 STMicroelectronics NV, you can compare the effects of market volatilities on NXP Semiconductors and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXP Semiconductors and STMicroelectronics.
Diversification Opportunities for NXP Semiconductors and STMicroelectronics
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NXP and STMicroelectronics is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and STMicroelectronics go up and down completely randomly.
Pair Corralation between NXP Semiconductors and STMicroelectronics
Given the investment horizon of 90 days NXP Semiconductors NV is expected to under-perform the STMicroelectronics. But the stock apears to be less risky and, when comparing its historical volatility, NXP Semiconductors NV is 1.5 times less risky than STMicroelectronics. The stock trades about -0.15 of its potential returns per unit of risk. The STMicroelectronics NV is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 2,742 in STMicroelectronics NV on August 29, 2024 and sell it today you would lose (206.00) from holding STMicroelectronics NV or give up 7.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NXP Semiconductors NV vs. STMicroelectronics NV
Performance |
| Timeline |
| NXP Semiconductors |
| STMicroelectronics |
NXP Semiconductors and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NXP Semiconductors and STMicroelectronics
The main advantage of trading using opposite NXP Semiconductors and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXP Semiconductors position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| NXP Semiconductors vs. Analog Devices | NXP Semiconductors vs. Qualcomm Incorporated | NXP Semiconductors vs. Broadcom | NXP Semiconductors vs. Microchip Technology |
| STMicroelectronics vs. Silicon Laboratories | STMicroelectronics vs. Power Integrations | STMicroelectronics vs. Diodes Incorporated | STMicroelectronics vs. MaxLinear |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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