Correlation Between NXP Semiconductors and ULTRA CLEAN

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

Diversification Opportunities for NXP Semiconductors and ULTRA CLEAN

0.48

Correlation Coefficient

NXP Semiconductors  ULTRA CLEAN

Very weak diversification

The 3 months correlation between NXP and ULTRA is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and ULTRA CLEAN HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULTRA CLEAN HLDGS 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 ULTRA CLEAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULTRA CLEAN HLDGS has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between NXP Semiconductors and ULTRA CLEAN

Assuming the 90 days trading horizon NXP Semiconductors NV is expected to generate 0.55 times more return on investment than ULTRA CLEAN. However, NXP Semiconductors NV is 1.82 times less risky than ULTRA CLEAN. It trades about -0.06 of its potential returns per unit of risk. ULTRA CLEAN HLDGS is currently generating about -0.16 per unit of risk. If you would invest  20,400  in NXP Semiconductors NV on December 28, 2024 and sell it today you would lose (1,850) from holding NXP Semiconductors NV or give up 9.07% of portfolio value over 90 days.

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

NXP Semiconductors NV  vs.  ULTRA CLEAN HLDGS

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.

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ULTRA CLEAN HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NXP Semiconductors and ULTRA CLEAN

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

The idea behind NXP Semiconductors NV and ULTRA CLEAN HLDGS 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.