Correlation Between NXP Semiconductors and Nucor
Can any of the company-specific risk be diversified away by investing in both NXP Semiconductors and Nucor 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 Nucor 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 Nucor, you can compare the effects of market volatilities on NXP Semiconductors and Nucor 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 Nucor. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXP Semiconductors and Nucor.
Diversification Opportunities for NXP Semiconductors and Nucor
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NXP and Nucor is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor 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 Nucor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and Nucor go up and down completely randomly.
Pair Corralation between NXP Semiconductors and Nucor
Assuming the 90 days trading horizon NXP Semiconductors NV is expected to generate 0.63 times more return on investment than Nucor. However, NXP Semiconductors NV is 1.58 times less risky than Nucor. It trades about -0.01 of its potential returns per unit of risk. Nucor is currently generating about -0.08 per unit of risk. If you would invest 20,902 in NXP Semiconductors NV on September 26, 2024 and sell it today you would lose (702.00) from holding NXP Semiconductors NV or give up 3.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NXP Semiconductors NV vs. Nucor
Performance |
| Timeline |
| NXP Semiconductors |
| Nucor |
NXP Semiconductors and Nucor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NXP Semiconductors and Nucor
The main advantage of trading using opposite NXP Semiconductors and Nucor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXP Semiconductors position performs unexpectedly, Nucor 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 Nucor will offset losses from the drop in Nucor's long position.| NXP Semiconductors vs. STRAYER EDUCATION | NXP Semiconductors vs. EMBARK EDUCATION LTD | NXP Semiconductors vs. UNIQA INSURANCE GR | NXP Semiconductors vs. CHINA EDUCATION GROUP |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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