Correlation Between ViacomCBS and NXP Semiconductors

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

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

Diversification Opportunities for ViacomCBS and NXP Semiconductors

-0.05

Correlation Coefficient

ViacomCBS  NXP Semiconductors

Good diversification

The 3 months correlation between ViacomCBS and NXP is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding ViacomCBS and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and ViacomCBS 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 ViacomCBS 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 ViacomCBS i.e., ViacomCBS and NXP Semiconductors go up and down completely randomly.

Pair Corralation between ViacomCBS and NXP Semiconductors

Assuming the 90 days horizon ViacomCBS is expected to generate 1.64 times more return on investment than NXP Semiconductors. However, ViacomCBS is 1.64 times more volatile than NXP Semiconductors NV. It trades about 0.04 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.05 per unit of risk. If you would invest  1,598  in ViacomCBS on September 14, 2024 and sell it today you would earn a total of  537.00  from holding ViacomCBS or generate 33.6% return on investment over 90 days.

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

ViacomCBS  vs.  NXP Semiconductors NV

ViacomCBS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ViacomCBS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ViacomCBS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NXP Semiconductors

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NXP Semiconductors NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 ViacomCBS and NXP Semiconductors

The main advantage of trading using opposite ViacomCBS and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ViacomCBS 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 ViacomCBS 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.