Correlation Between NXP Semiconductors and Alupar Investimento

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

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

Diversification Opportunities for NXP Semiconductors and Alupar Investimento

-0.65

Correlation Coefficient

NXP Semiconductors  Alupar Investimento

Excellent diversification

The 3 months correlation between NXP and Alupar is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Alupar Investimento SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alupar Investimento and NXP Semiconductors 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 NXP Semiconductors NV are associated (or correlated) with Alupar Investimento. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alupar Investimento has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and Alupar Investimento go up and down completely randomly.

Pair Corralation between NXP Semiconductors and Alupar Investimento

Assuming the 90 days trading horizon NXP Semiconductors NV is expected to under-perform the Alupar Investimento. In addition to that, NXP Semiconductors is 1.63 times more volatile than Alupar Investimento SA. It trades about -0.09 of its total potential returns per unit of risk. Alupar Investimento SA is currently generating about 0.09 per unit of volatility. If you would invest  890.00  in Alupar Investimento SA on December 30, 2024 and sell it today you would earn a total of  74.00  from holding Alupar Investimento SA or generate 8.31% return on investment over 90 days.

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

NXP Semiconductors NV  vs.  Alupar Investimento SA

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Alupar Investimento

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alupar Investimento SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Alupar Investimento may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NXP Semiconductors and Alupar Investimento

The main advantage of trading using opposite NXP Semiconductors and Alupar Investimento positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXP Semiconductors position performs unexpectedly, Alupar Investimento 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 Alupar Investimento will offset losses from the drop in Alupar Investimento's long position.

The idea behind NXP Semiconductors NV and Alupar Investimento SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.