Correlation Between NXP Semiconductors and PARAGON GROUP

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

Diversification Opportunities for NXP Semiconductors and PARAGON GROUP

-0.04

Correlation Coefficient

NXP Semiconductors  PARAGON GROUP

Good diversification

The 3 months correlation between NXP and PARAGON is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and PARAGON GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PARAGON GROUP 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 PARAGON GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PARAGON GROUP has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and PARAGON GROUP go up and down completely randomly.

Pair Corralation between NXP Semiconductors and PARAGON GROUP

Assuming the 90 days trading horizon NXP Semiconductors NV is expected to under-perform the PARAGON GROUP. In addition to that, NXP Semiconductors is 1.28 times more volatile than PARAGON GROUP. It trades about -0.03 of its total potential returns per unit of risk. PARAGON GROUP is currently generating about -0.02 per unit of volatility. If you would invest  945.00  in PARAGON GROUP on October 25, 2024 and sell it today you would lose (60.00) from holding PARAGON GROUP or give up 6.35% of portfolio value over 90 days.

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

NXP Semiconductors NV  vs.  PARAGON GROUP

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. In spite of comparatively stable basic indicators, NXP Semiconductors is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

PARAGON GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PARAGON GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, PARAGON GROUP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NXP Semiconductors and PARAGON GROUP

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

The idea behind NXP Semiconductors NV and PARAGON GROUP 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.