Correlation Between NXP Semiconductors and Healthcare Realty

Can any of the company-specific risk be diversified away by investing in both NXP Semiconductors and Healthcare Realty 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 Healthcare Realty 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 Healthcare Realty Trust, you can compare the effects of market volatilities on NXP Semiconductors and Healthcare Realty 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 Healthcare Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXP Semiconductors and Healthcare Realty.

Diversification Opportunities for NXP Semiconductors and Healthcare Realty

0.36

Correlation Coefficient

NXP Semiconductors  Healthcare Realty

Weak diversification

The 3 months correlation between NXP and Healthcare is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Healthcare Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Realty Trust 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 Healthcare Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Realty Trust has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and Healthcare Realty go up and down completely randomly.

Pair Corralation between NXP Semiconductors and Healthcare Realty

Assuming the 90 days trading horizon NXP Semiconductors NV is expected to under-perform the Healthcare Realty. In addition to that, NXP Semiconductors is 1.9 times more volatile than Healthcare Realty Trust. It trades about -0.05 of its total potential returns per unit of risk. Healthcare Realty Trust is currently generating about -0.04 per unit of volatility. If you would invest  2,582  in Healthcare Realty Trust on December 25, 2024 and sell it today you would lose (82.00) from holding Healthcare Realty Trust or give up 3.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

NXP Semiconductors NV  vs.  Healthcare Realty Trust

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 uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Healthcare Realty Trust

Risk-Adjusted Performance

Very Weak

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

Pair Trading with NXP Semiconductors and Healthcare Realty

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

The idea behind NXP Semiconductors NV and Healthcare Realty Trust 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.