Correlation Between NXP Semiconductors and Intel

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

Diversification Opportunities for NXP Semiconductors and Intel

0.89

Correlation Coefficient

NXP Semiconductors  Intel

Very poor diversification

The 3 months correlation between NXP and Intel is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and Intel go up and down completely randomly.

Pair Corralation between NXP Semiconductors and Intel

Given the investment horizon of 90 days NXP Semiconductors is expected to generate 2.44 times less return on investment than Intel. But when comparing it to its historical volatility, NXP Semiconductors NV is 1.68 times less risky than Intel. It trades about 0.04 of its potential returns per unit of risk. Intel is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,240  in Intel on November 21, 2024 and sell it today you would earn a total of  332.00  from holding Intel or generate 14.82% return on investment over 90 days.

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

NXP Semiconductors NV  vs.  Intel

NXP Semiconductors

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NXP Semiconductors NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, NXP Semiconductors may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Intel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Intel may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with NXP Semiconductors and Intel

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

The idea behind NXP Semiconductors NV and Intel 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.