Correlation Between NXP Semiconductors and SBM OFFSHORE

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

Diversification Opportunities for NXP Semiconductors and SBM OFFSHORE

0.01

Correlation Coefficient

NXP Semiconductors  SBM OFFSHORE

Significant diversification

The 3 months correlation between NXP and SBM is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE 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 SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between NXP Semiconductors and SBM OFFSHORE

Assuming the 90 days trading horizon NXP Semiconductors is expected to generate 2.88 times less return on investment than SBM OFFSHORE. In addition to that, NXP Semiconductors is 1.25 times more volatile than SBM OFFSHORE. It trades about 0.03 of its total potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.09 per unit of volatility. If you would invest  1,188  in SBM OFFSHORE on October 5, 2024 and sell it today you would earn a total of  487.00  from holding SBM OFFSHORE or generate 40.99% return on investment over 90 days.

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

NXP Semiconductors NV  vs.  SBM OFFSHORE

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.

SBM OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NXP Semiconductors and SBM OFFSHORE

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

The idea behind NXP Semiconductors NV and SBM OFFSHORE 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.