Correlation Between NXP Semiconductors and Haverty Furniture

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

Diversification Opportunities for NXP Semiconductors and Haverty Furniture

0.37

Correlation Coefficient

NXP Semiconductors  Haverty Furniture

Weak diversification

The 3 months correlation between NXP and Haverty is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Haverty Furniture Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haverty Furniture 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 Haverty Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haverty Furniture has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and Haverty Furniture go up and down completely randomly.

Pair Corralation between NXP Semiconductors and Haverty Furniture

Assuming the 90 days trading horizon NXP Semiconductors NV is expected to under-perform the Haverty Furniture. But the stock apears to be less risky and, when comparing its historical volatility, NXP Semiconductors NV is 1.16 times less risky than Haverty Furniture. The stock trades about -0.06 of its potential returns per unit of risk. The Haverty Furniture Companies is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,049  in Haverty Furniture Companies on December 28, 2024 and sell it today you would lose (169.00) from holding Haverty Furniture Companies or give up 8.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

NXP Semiconductors NV  vs.  Haverty Furniture Companies

NXP Semiconductors

Risk-Adjusted Performance

Very Weak

Over the last 90 days NXP Semiconductors NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Haverty Furniture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with NXP Semiconductors and Haverty Furniture

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

The idea behind NXP Semiconductors NV and Haverty Furniture Companies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.