Correlation Between CDN IMPERIAL and NXP Semiconductors

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

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

Diversification Opportunities for CDN IMPERIAL and NXP Semiconductors

0.49

Correlation Coefficient

CDN IMPERIAL  NXP Semiconductors

Very weak diversification

The 3 months correlation between CDN and NXP is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and CDN IMPERIAL 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 CDN IMPERIAL BANK 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 CDN IMPERIAL i.e., CDN IMPERIAL and NXP Semiconductors go up and down completely randomly.

Pair Corralation between CDN IMPERIAL and NXP Semiconductors

Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to under-perform the NXP Semiconductors. But the stock apears to be less risky and, when comparing its historical volatility, CDN IMPERIAL BANK is 1.41 times less risky than NXP Semiconductors. The stock trades about -0.13 of its potential returns per unit of risk. The NXP Semiconductors NV is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  20,599  in NXP Semiconductors NV on December 26, 2024 and sell it today you would lose (1,049) from holding NXP Semiconductors NV or give up 5.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

CDN IMPERIAL BANK  vs.  NXP Semiconductors NV

CDN IMPERIAL BANK

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDN IMPERIAL BANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

NXP Semiconductors

Risk-Adjusted Performance

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 CDN IMPERIAL and NXP Semiconductors

The main advantage of trading using opposite CDN IMPERIAL and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDN IMPERIAL 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 CDN IMPERIAL BANK 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.