Correlation Between NXP Semiconductors and CEVA

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

Diversification Opportunities for NXP Semiconductors and CEVA

-0.79

Correlation Coefficient

NXP Semiconductors  CEVA

Pay attention - limited upside

The 3 months correlation between NXP and CEVA is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and CEVA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEVA Inc 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 CEVA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEVA Inc has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and CEVA go up and down completely randomly.

Pair Corralation between NXP Semiconductors and CEVA

Given the investment horizon of 90 days NXP Semiconductors is expected to generate 9.98 times less return on investment than CEVA. But when comparing it to its historical volatility, NXP Semiconductors NV is 1.45 times less risky than CEVA. It trades about 0.03 of its potential returns per unit of risk. CEVA Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,182  in CEVA Inc on October 22, 2024 and sell it today you would earn a total of  236.00  from holding CEVA Inc or generate 7.42% 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.  CEVA Inc

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 fairly strong basic indicators, NXP Semiconductors is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

CEVA Inc

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with NXP Semiconductors and CEVA

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

The idea behind NXP Semiconductors NV and CEVA Inc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.