Correlation Between NXP Semiconductors and Agilent Technologies

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

Diversification Opportunities for NXP Semiconductors and Agilent Technologies

0.11

Correlation Coefficient

NXP Semiconductors  Agilent Technologies

Average diversification

The 3 months correlation between NXP and Agilent is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies 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 Agilent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agilent Technologies has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and Agilent Technologies go up and down completely randomly.

Pair Corralation between NXP Semiconductors and Agilent Technologies

If you would invest  64,182  in NXP Semiconductors NV on September 13, 2024 and sell it today you would earn a total of  1,752  from holding NXP Semiconductors NV or generate 2.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

NXP Semiconductors NV  vs.  Agilent Technologies

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. Despite somewhat strong basic indicators, NXP Semiconductors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Agilent Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Agilent Technologies 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 Agilent Technologies

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

The idea behind NXP Semiconductors NV and Agilent Technologies 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.