Correlation Between Amylyx Pharmaceuticals and NXP Semiconductors

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

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

Diversification Opportunities for Amylyx Pharmaceuticals and NXP Semiconductors

0.05

Correlation Coefficient

Amylyx Pharmaceuticals  NXP Semiconductors

Significant diversification

The 3 months correlation between Amylyx and NXP is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Amylyx Pharmaceuticals and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and Amylyx Pharmaceuticals 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 Amylyx Pharmaceuticals 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 Amylyx Pharmaceuticals i.e., Amylyx Pharmaceuticals and NXP Semiconductors go up and down completely randomly.

Pair Corralation between Amylyx Pharmaceuticals and NXP Semiconductors

Given the investment horizon of 90 days Amylyx Pharmaceuticals is expected to under-perform the NXP Semiconductors. In addition to that, Amylyx Pharmaceuticals is 2.68 times more volatile than NXP Semiconductors NV. It trades about -0.03 of its total potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.03 per unit of volatility. If you would invest  16,479  in NXP Semiconductors NV on October 5, 2024 and sell it today you would earn a total of  4,142  from holding NXP Semiconductors NV or generate 25.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Amylyx Pharmaceuticals  vs.  NXP Semiconductors NV

Amylyx Pharmaceuticals

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amylyx Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Amylyx Pharmaceuticals showed 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. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Amylyx Pharmaceuticals and NXP Semiconductors

The main advantage of trading using opposite Amylyx Pharmaceuticals and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amylyx Pharmaceuticals 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 Amylyx Pharmaceuticals 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.