Correlation Between Scottish Mortgage and NXP Semiconductors

Can any of the company-specific risk be diversified away by investing in both Scottish Mortgage 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 Scottish Mortgage and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Scottish Mortgage Investment and NXP Semiconductors NV, you can compare the effects of market volatilities on Scottish Mortgage 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 Scottish Mortgage with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scottish Mortgage and NXP Semiconductors.

Diversification Opportunities for Scottish Mortgage and NXP Semiconductors

-0.47

Correlation Coefficient

Scottish Mortgage  NXP Semiconductors

Very good diversification

The 3 months correlation between Scottish and NXP is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Scottish Mortgage Investment and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and Scottish Mortgage 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 Scottish Mortgage Investment 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 Scottish Mortgage i.e., Scottish Mortgage and NXP Semiconductors go up and down completely randomly.

Pair Corralation between Scottish Mortgage and NXP Semiconductors

Assuming the 90 days trading horizon Scottish Mortgage Investment is expected to generate 0.79 times more return on investment than NXP Semiconductors. However, Scottish Mortgage Investment is 1.26 times less risky than NXP Semiconductors. It trades about -0.01 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about -0.04 per unit of risk. If you would invest  1,178  in Scottish Mortgage Investment on October 10, 2024 and sell it today you would lose (3.00) from holding Scottish Mortgage Investment or give up 0.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Scottish Mortgage Investment  vs.  NXP Semiconductors NV

Scottish Mortgage

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Scottish Mortgage reported solid returns over the last few months and may actually be approaching a breakup point.

NXP Semiconductors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NXP Semiconductors NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NXP Semiconductors is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Scottish Mortgage and NXP Semiconductors

The main advantage of trading using opposite Scottish Mortgage and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scottish Mortgage 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.

The idea behind Scottish Mortgage Investment and NXP Semiconductors NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.