Correlation Between Rohm Co and NXP Semiconductors

Can any of the company-specific risk be diversified away by investing in both Rohm Co and NXP Semiconductors 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 Rohm Co and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rohm Co Ltd and NXP Semiconductors NV, you can compare the effects of market volatilities on Rohm Co and NXP Semiconductors 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 Rohm Co with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rohm Co and NXP Semiconductors.

Diversification Opportunities for Rohm Co and NXP Semiconductors

0.74

Correlation Coefficient

Rohm Co  NXP Semiconductors

Poor diversification

The 3 months correlation between Rohm and NXP is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Rohm Co Ltd and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and Rohm Co 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 Rohm Co Ltd are associated (or correlated) with NXP Semiconductors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXP Semiconductors has no effect on the direction of Rohm Co i.e., Rohm Co and NXP Semiconductors go up and down completely randomly.

Pair Corralation between Rohm Co and NXP Semiconductors

Assuming the 90 days horizon Rohm Co Ltd is expected to under-perform the NXP Semiconductors. In addition to that, Rohm Co is 1.05 times more volatile than NXP Semiconductors NV. It trades about -0.05 of its total potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.03 per unit of volatility. If you would invest  16,302  in NXP Semiconductors NV on October 11, 2024 and sell it today you would earn a total of  4,670  from holding NXP Semiconductors NV or generate 28.65% return on investment over 90 days.

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

Rohm Co Ltd  vs.  NXP Semiconductors NV

Rohm Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rohm Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Rohm Co and NXP Semiconductors

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

The idea behind Rohm Co Ltd and NXP Semiconductors NV 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.