Correlation Between NXP Semiconductors and Xenia Hotels

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

Diversification Opportunities for NXP Semiconductors and Xenia Hotels

-0.23

Correlation Coefficient

NXP Semiconductors  Xenia Hotels

Very good diversification

The 3 months correlation between NXP and Xenia is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Xenia Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xenia Hotels Resorts 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 Xenia Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xenia Hotels Resorts has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and Xenia Hotels go up and down completely randomly.

Pair Corralation between NXP Semiconductors and Xenia Hotels

Assuming the 90 days trading horizon NXP Semiconductors NV is expected to generate 1.04 times more return on investment than Xenia Hotels. However, NXP Semiconductors is 1.04 times more volatile than Xenia Hotels Resorts. It trades about 0.03 of its potential returns per unit of risk. Xenia Hotels Resorts is currently generating about -0.11 per unit of risk. If you would invest  21,300  in NXP Semiconductors NV on November 29, 2024 and sell it today you would earn a total of  600.00  from holding NXP Semiconductors NV or generate 2.82% return on investment over 90 days.

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

NXP Semiconductors NV  vs.  Xenia Hotels Resorts

NXP Semiconductors

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NXP Semiconductors NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, NXP Semiconductors is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Xenia Hotels Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xenia Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NXP Semiconductors and Xenia Hotels

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

The idea behind NXP Semiconductors NV and Xenia Hotels Resorts 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..