Correlation Between METISA Metalrgica and NXP Semiconductors

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

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

Diversification Opportunities for METISA Metalrgica and NXP Semiconductors

-0.16

Correlation Coefficient

METISA Metalrgica  NXP Semiconductors

Good diversification

The 3 months correlation between METISA and NXP is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding METISA Metalrgica Timboense and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and METISA Metalrgica 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 METISA Metalrgica Timboense 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 METISA Metalrgica i.e., METISA Metalrgica and NXP Semiconductors go up and down completely randomly.

Pair Corralation between METISA Metalrgica and NXP Semiconductors

Assuming the 90 days trading horizon METISA Metalrgica Timboense is expected to generate 1.16 times more return on investment than NXP Semiconductors. However, METISA Metalrgica is 1.16 times more volatile than NXP Semiconductors NV. It trades about 0.21 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about -0.13 per unit of risk. If you would invest  3,615  in METISA Metalrgica Timboense on October 8, 2024 and sell it today you would earn a total of  284.00  from holding METISA Metalrgica Timboense or generate 7.86% return on investment over 90 days.

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

METISA Metalrgica Timboense  vs.  NXP Semiconductors NV

METISA Metalrgica

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in METISA Metalrgica Timboense are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, METISA Metalrgica may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with METISA Metalrgica and NXP Semiconductors

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

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.