Correlation Between Peak Resources and NXP Semiconductors

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

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

Diversification Opportunities for Peak Resources and NXP Semiconductors

-0.04

Correlation Coefficient

Peak Resources  NXP Semiconductors

Good diversification

The 3 months correlation between Peak and NXP is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Peak Resources Limited and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and Peak Resources 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 Peak Resources Limited 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 Peak Resources i.e., Peak Resources and NXP Semiconductors go up and down completely randomly.

Pair Corralation between Peak Resources and NXP Semiconductors

Assuming the 90 days horizon Peak Resources Limited is expected to under-perform the NXP Semiconductors. In addition to that, Peak Resources is 4.44 times more volatile than NXP Semiconductors NV. It trades about -0.04 of its total potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.03 per unit of volatility. If you would invest  21,194  in NXP Semiconductors NV on September 4, 2024 and sell it today you would earn a total of  506.00  from holding NXP Semiconductors NV or generate 2.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Peak Resources Limited  vs.  NXP Semiconductors NV

Peak Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peak Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NXP Semiconductors

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NXP Semiconductors NV are ranked lower than 2 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Peak Resources and NXP Semiconductors

The main advantage of trading using opposite Peak Resources and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peak Resources 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 Peak Resources Limited 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.