Correlation Between NXP Semiconductors and General Dynamics
Can any of the company-specific risk be diversified away by investing in both NXP Semiconductors and General Dynamics 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 General Dynamics 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 General Dynamics, you can compare the effects of market volatilities on NXP Semiconductors and General Dynamics 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 General Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXP Semiconductors and General Dynamics.
Diversification Opportunities for NXP Semiconductors and General Dynamics
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between NXP and General is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics 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 General Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and General Dynamics go up and down completely randomly.
Pair Corralation between NXP Semiconductors and General Dynamics
Assuming the 90 days trading horizon NXP Semiconductors NV is expected to generate 1.46 times more return on investment than General Dynamics. However, NXP Semiconductors is 1.46 times more volatile than General Dynamics. It trades about 0.04 of its potential returns per unit of risk. General Dynamics is currently generating about 0.03 per unit of risk. If you would invest 15,643 in NXP Semiconductors NV on September 3, 2024 and sell it today you would earn a total of 5,757 from holding NXP Semiconductors NV or generate 36.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NXP Semiconductors NV vs. General Dynamics
Performance |
| Timeline |
| NXP Semiconductors |
| General Dynamics |
NXP Semiconductors and General Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NXP Semiconductors and General Dynamics
The main advantage of trading using opposite NXP Semiconductors and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXP Semiconductors position performs unexpectedly, General Dynamics 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 General Dynamics will offset losses from the drop in General Dynamics' long position.| NXP Semiconductors vs. ULTRA CLEAN HLDGS | NXP Semiconductors vs. Columbia Sportswear | NXP Semiconductors vs. Constellation Software | NXP Semiconductors vs. Transport International Holdings |
| General Dynamics vs. GREENX METALS LTD | General Dynamics vs. CODERE ONLINE LUX | General Dynamics vs. NXP Semiconductors NV | General Dynamics vs. Jacquet Metal Service |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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