Correlation Between NXP Semiconductors and Patria Investments

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

Diversification Opportunities for NXP Semiconductors and Patria Investments

-0.09

Correlation Coefficient

NXP Semiconductors  Patria Investments

Good diversification

The 3 months correlation between NXP and Patria is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Patria Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Investments 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 Patria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Investments has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and Patria Investments go up and down completely randomly.

Pair Corralation between NXP Semiconductors and Patria Investments

Assuming the 90 days trading horizon NXP Semiconductors NV is expected to generate 2.0 times more return on investment than Patria Investments. However, NXP Semiconductors is 2.0 times more volatile than Patria Investments Limited. It trades about 0.06 of its potential returns per unit of risk. Patria Investments Limited is currently generating about 0.01 per unit of risk. If you would invest  43,440  in NXP Semiconductors NV on October 10, 2024 and sell it today you would earn a total of  22,210  from holding NXP Semiconductors NV or generate 51.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.39%
Values	Daily Returns

NXP Semiconductors NV  vs.  Patria Investments Limited

NXP Semiconductors

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NXP Semiconductors NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Patria Investments

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patria Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NXP Semiconductors and Patria Investments

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

The idea behind NXP Semiconductors NV and Patria Investments Limited 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 Commodity Directory module to find actively traded commodities issued by global exchanges.