Correlation Between Highlight Communications and NXP Semiconductors

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Can any of the company-specific risk be diversified away by investing in both Highlight Communications 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 Highlight Communications and NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and NXP Semiconductors NV, you can compare the effects of market volatilities on Highlight Communications 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 Highlight Communications with a short position of NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and NXP Semiconductors.

Diversification Opportunities for Highlight Communications and NXP Semiconductors

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between Highlight and NXP is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and Highlight Communications 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 Highlight Communications AG 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 Highlight Communications i.e., Highlight Communications and NXP Semiconductors go up and down completely randomly.

Pair Corralation between Highlight Communications and NXP Semiconductors

Assuming the 90 days trading horizon Highlight Communications AG is expected to under-perform the NXP Semiconductors. In addition to that, Highlight Communications is 1.96 times more volatile than NXP Semiconductors NV. It trades about -0.09 of its total potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.02 per unit of volatility. If you would invest  20,803  in NXP Semiconductors NV on September 12, 2024 and sell it today you would earn a total of  297.00  from holding NXP Semiconductors NV or generate 1.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Highlight Communications AG  vs.  NXP Semiconductors NV

 Performance 
       Timeline  
Highlight Communications 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Highlight Communications AG 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 comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
NXP Semiconductors 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Insignificant
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.

Highlight Communications and NXP Semiconductors Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Highlight Communications and NXP Semiconductors

The main advantage of trading using opposite Highlight Communications and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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 Highlight Communications AG 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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