Correlation Between NXP Semiconductors and SECURITAS

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

Diversification Opportunities for NXP Semiconductors and SECURITAS

0.23

Correlation Coefficient

NXP Semiconductors  SECURITAS

Modest diversification

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

Pair Corralation between NXP Semiconductors and SECURITAS

Assuming the 90 days trading horizon NXP Semiconductors NV is expected to under-perform the SECURITAS. In addition to that, NXP Semiconductors is 1.61 times more volatile than SECURITAS B . It trades about -0.04 of its total potential returns per unit of risk. SECURITAS B is currently generating about 0.13 per unit of volatility. If you would invest  1,190  in SECURITAS B on December 23, 2024 and sell it today you would earn a total of  129.00  from holding SECURITAS B or generate 10.84% return on investment over 90 days.

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

NXP Semiconductors NV  vs.  SECURITAS B

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 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.

SECURITAS B

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SECURITAS B are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SECURITAS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NXP Semiconductors and SECURITAS

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

The idea behind NXP Semiconductors NV and SECURITAS B 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.