Correlation Between NXP Semiconductors and Global X

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

Diversification Opportunities for NXP Semiconductors and Global X

0.68

Correlation Coefficient

NXP Semiconductors  Global X

Poor diversification

The 3 months correlation between NXP and Global is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Funds has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and Global X go up and down completely randomly.

Pair Corralation between NXP Semiconductors and Global X

Assuming the 90 days trading horizon NXP Semiconductors NV is expected to generate 1.46 times more return on investment than Global X. However, NXP Semiconductors is 1.46 times more volatile than Global X Funds. It trades about 0.28 of its potential returns per unit of risk. Global X Funds is currently generating about 0.05 per unit of risk. If you would invest  65,803  in NXP Semiconductors NV on March 5, 2024 and sell it today you would earn a total of  4,693  from holding NXP Semiconductors NV or generate 7.13% return on investment over 90 days.

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

NXP Semiconductors NV  vs.  Global X Funds

NXP Semiconductors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NXP Semiconductors NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NXP Semiconductors sustained solid returns over the last few months and may actually be approaching a breakup point.

Global X Funds

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global X is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NXP Semiconductors and Global X

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

The idea behind NXP Semiconductors NV and Global X Funds 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.