Correlation Between STMicroelectronics and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics 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 STMicroelectronics and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV ADR and NXP Semiconductors NV, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and NXP Semiconductors.
Diversification Opportunities for STMicroelectronics and NXP Semiconductors
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between STMicroelectronics and NXP is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and STMicroelectronics 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 STMicroelectronics NV ADR 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 STMicroelectronics i.e., STMicroelectronics and NXP Semiconductors go up and down completely randomly.
Pair Corralation between STMicroelectronics and NXP Semiconductors
Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to generate 1.02 times more return on investment than NXP Semiconductors. However, STMicroelectronics is 1.02 times more volatile than NXP Semiconductors NV. It trades about 0.27 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.17 per unit of risk. If you would invest 2,171 in STMicroelectronics NV ADR on April 23, 2025 and sell it today you would earn a total of 1,110 from holding STMicroelectronics NV ADR or generate 51.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV ADR vs. NXP Semiconductors NV
Performance |
| Timeline |
| STMicroelectronics NV ADR |
| NXP Semiconductors |
STMicroelectronics and NXP Semiconductors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and NXP Semiconductors
The main advantage of trading using opposite STMicroelectronics and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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.| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
| NXP Semiconductors vs. Analog Devices | NXP Semiconductors vs. Qualcomm Incorporated | NXP Semiconductors vs. Broadcom | NXP Semiconductors vs. Microchip Technology |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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