Correlation Between NXP Semiconductors and Geely Automobile
Can any of the company-specific risk be diversified away by investing in both NXP Semiconductors and Geely Automobile 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 Geely Automobile 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 Geely Automobile Holdings, you can compare the effects of market volatilities on NXP Semiconductors and Geely Automobile 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 Geely Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXP Semiconductors and Geely Automobile.
Diversification Opportunities for NXP Semiconductors and Geely Automobile
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NXP and Geely is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Geely Automobile Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geely Automobile Holdings 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 Geely Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geely Automobile Holdings has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and Geely Automobile go up and down completely randomly.
Pair Corralation between NXP Semiconductors and Geely Automobile
Assuming the 90 days trading horizon NXP Semiconductors is expected to generate 2.24 times less return on investment than Geely Automobile. But when comparing it to its historical volatility, NXP Semiconductors NV is 1.45 times less risky than Geely Automobile. It trades about 0.04 of its potential returns per unit of risk. Geely Automobile Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 91.00 in Geely Automobile Holdings on October 9, 2024 and sell it today you would earn a total of 86.00 from holding Geely Automobile Holdings or generate 94.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.8% |
Values | Daily Returns |
NXP Semiconductors NV vs. Geely Automobile Holdings
Performance |
Timeline |
NXP Semiconductors |
Geely Automobile Holdings |
NXP Semiconductors and Geely Automobile Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NXP Semiconductors and Geely Automobile
The main advantage of trading using opposite NXP Semiconductors and Geely Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXP Semiconductors position performs unexpectedly, Geely Automobile 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 Geely Automobile will offset losses from the drop in Geely Automobile's long position.NXP Semiconductors vs. MOVIE GAMES SA | NXP Semiconductors vs. The Boston Beer | NXP Semiconductors vs. GLG LIFE TECH | NXP Semiconductors vs. SAN MIGUEL BREWERY |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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