Correlation Between NXP Semiconductors and YDUQ3F

Can any of the company-specific risk be diversified away by investing in both NXP Semiconductors and YDUQ3F 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 YDUQ3F 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 YDUQ3F, you can compare the effects of market volatilities on NXP Semiconductors and YDUQ3F 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 YDUQ3F. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXP Semiconductors and YDUQ3F.

Diversification Opportunities for NXP Semiconductors and YDUQ3F

0.15

Correlation Coefficient

NXP Semiconductors  YDUQ3F

Average diversification

The 3 months correlation between NXP and YDUQ3F is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and YDUQ3F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YDUQ3F 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 YDUQ3F. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YDUQ3F has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and YDUQ3F go up and down completely randomly.

Pair Corralation between NXP Semiconductors and YDUQ3F

Assuming the 90 days trading horizon NXP Semiconductors NV is expected to under-perform the YDUQ3F. But the stock apears to be less risky and, when comparing its historical volatility, NXP Semiconductors NV is 2.38 times less risky than YDUQ3F. The stock trades about -0.01 of its potential returns per unit of risk. The YDUQ3F is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  891.00  in YDUQ3F on October 11, 2024 and sell it today you would earn a total of  20.00  from holding YDUQ3F or generate 2.24% return on investment over 90 days.

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

NXP Semiconductors NV  vs.  YDUQ3F

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.

YDUQ3F

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in YDUQ3F are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YDUQ3F sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NXP Semiconductors and YDUQ3F

The main advantage of trading using opposite NXP Semiconductors and YDUQ3F positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXP Semiconductors position performs unexpectedly, YDUQ3F 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 YDUQ3F will offset losses from the drop in YDUQ3F's long position.

The idea behind NXP Semiconductors NV and YDUQ3F 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.