Correlation Between Clover Health and NXP Semiconductors

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

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

Diversification Opportunities for Clover Health and NXP Semiconductors

0.46

Correlation Coefficient

Clover Health  NXP Semiconductors

Very weak diversification

The 3 months correlation between Clover and NXP is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Clover Health Investments, and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and Clover Health 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 Clover Health Investments, 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 Clover Health i.e., Clover Health and NXP Semiconductors go up and down completely randomly.

Pair Corralation between Clover Health and NXP Semiconductors

Assuming the 90 days trading horizon Clover Health Investments, is expected to under-perform the NXP Semiconductors. In addition to that, Clover Health is 1.62 times more volatile than NXP Semiconductors NV. It trades about -0.12 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  65,840  in NXP Semiconductors NV on October 7, 2024 and sell it today you would lose (2,416) from holding NXP Semiconductors NV or give up 3.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.37%
Values	Daily Returns

Clover Health Investments,  vs.  NXP Semiconductors NV

Clover Health Invest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clover Health Investments, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Clover Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 somewhat strong basic indicators, NXP Semiconductors is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Clover Health and NXP Semiconductors

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