Correlation Between Platinum Investment and NXP Semiconductors

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

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

Diversification Opportunities for Platinum Investment and NXP Semiconductors

0.44

Correlation Coefficient

Platinum Investment  NXP Semiconductors

Very weak diversification

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

Pair Corralation between Platinum Investment and NXP Semiconductors

Assuming the 90 days horizon Platinum Investment Management is expected to under-perform the NXP Semiconductors. In addition to that, Platinum Investment is 1.8 times more volatile than NXP Semiconductors NV. It trades about -0.07 of its total potential returns per unit of risk. NXP Semiconductors NV is currently generating about -0.1 per unit of volatility. If you would invest  22,495  in NXP Semiconductors NV on September 26, 2024 and sell it today you would lose (2,295) from holding NXP Semiconductors NV or give up 10.2% of portfolio value over 90 days.

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

Platinum Investment Management  vs.  NXP Semiconductors NV

Platinum Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Platinum Investment Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Platinum Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NXP Semiconductors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NXP Semiconductors NV has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Platinum Investment and NXP Semiconductors

The main advantage of trading using opposite Platinum Investment and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Platinum Investment 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 Platinum Investment Management 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.