Correlation Between Cirrus Logic and NXP Semiconductors

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

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

Diversification Opportunities for Cirrus Logic and NXP Semiconductors

0.78

Correlation Coefficient

Cirrus Logic  NXP Semiconductors

Poor diversification

The 3 months correlation between Cirrus and NXP is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Cirrus Logic and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and Cirrus Logic 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 Cirrus Logic 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 Cirrus Logic i.e., Cirrus Logic and NXP Semiconductors go up and down completely randomly.

Pair Corralation between Cirrus Logic and NXP Semiconductors

Given the investment horizon of 90 days Cirrus Logic is expected to generate 0.97 times more return on investment than NXP Semiconductors. However, Cirrus Logic is 1.03 times less risky than NXP Semiconductors. It trades about -0.02 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about -0.05 per unit of risk. If you would invest  10,784  in Cirrus Logic on December 2, 2024 and sell it today you would lose (363.00) from holding Cirrus Logic or give up 3.37% of portfolio value over 90 days.

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

Cirrus Logic  vs.  NXP Semiconductors NV

Cirrus Logic

Risk-Adjusted Performance

Very Weak

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

The main advantage of trading using opposite Cirrus Logic and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cirrus Logic 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 Cirrus Logic 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..