Correlation Between Science Applications and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both Science Applications 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 Science Applications and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Science Applications International and NXP Semiconductors NV, you can compare the effects of market volatilities on Science Applications 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 Science Applications with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Applications and NXP Semiconductors.
Diversification Opportunities for Science Applications and NXP Semiconductors
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Science and NXP is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and Science Applications 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 Science Applications International 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 Science Applications i.e., Science Applications and NXP Semiconductors go up and down completely randomly.
Pair Corralation between Science Applications and NXP Semiconductors
Assuming the 90 days trading horizon Science Applications International is expected to under-perform the NXP Semiconductors. But the stock apears to be less risky and, when comparing its historical volatility, Science Applications International is 1.02 times less risky than NXP Semiconductors. The stock trades about -0.18 of its potential returns per unit of risk. The NXP Semiconductors NV is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 21,300 in NXP Semiconductors NV on December 5, 2024 and sell it today you would lose (600.00) from holding NXP Semiconductors NV or give up 2.82% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Science Applications Internati vs. NXP Semiconductors NV
Performance |
Timeline |
Science Applications |
NXP Semiconductors |
Science Applications and NXP Semiconductors Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Science Applications and NXP Semiconductors
The main advantage of trading using opposite Science Applications and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications 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.Science Applications vs. Nanjing Panda Electronics | Science Applications vs. Aya Gold Silver | Science Applications vs. LPKF Laser Electronics | Science Applications vs. United Microelectronics |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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