Correlation Between National Health and NXP Semiconductors

Can any of the company-specific risk be diversified away by investing in both National Health and NXP Semiconductors 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 National Health and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Health Investors and NXP Semiconductors NV, you can compare the effects of market volatilities on National Health and NXP Semiconductors 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 National Health with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and NXP Semiconductors.

Diversification Opportunities for National Health and NXP Semiconductors

0.2

Correlation Coefficient

National Health  NXP Semiconductors

Modest diversification

The 3 months correlation between National and NXP is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and National Health 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 National Health Investors are associated (or correlated) with NXP Semiconductors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXP Semiconductors has no effect on the direction of National Health i.e., National Health and NXP Semiconductors go up and down completely randomly.

Pair Corralation between National Health and NXP Semiconductors

Assuming the 90 days trading horizon National Health Investors is expected to under-perform the NXP Semiconductors. But the stock apears to be less risky and, when comparing its historical volatility, National Health Investors is 1.74 times less risky than NXP Semiconductors. The stock trades about -0.52 of its potential returns per unit of risk. The NXP Semiconductors NV is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  21,300  in NXP Semiconductors NV on September 29, 2024 and sell it today you would lose (600.00) from holding NXP Semiconductors NV or give up 2.82% of portfolio value over 90 days.

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

National Health Investors  vs.  NXP Semiconductors NV

National Health Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Health Investors 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.

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.

Pair Trading with National Health and NXP Semiconductors

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

The idea behind National Health Investors and NXP Semiconductors NV 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.