Correlation Between NXP Semiconductors and INTERSHOP Communications

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

Diversification Opportunities for NXP Semiconductors and INTERSHOP Communications

0.29

Correlation Coefficient

NXP Semiconductors  INTERSHOP Communications

Modest diversification

The 3 months correlation between NXP and INTERSHOP is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NXP Semiconductors NV and INTERSHOP Communications Aktie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERSHOP Communications 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 INTERSHOP Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERSHOP Communications has no effect on the direction of NXP Semiconductors i.e., NXP Semiconductors and INTERSHOP Communications go up and down completely randomly.

Pair Corralation between NXP Semiconductors and INTERSHOP Communications

Assuming the 90 days trading horizon NXP Semiconductors NV is expected to generate 1.35 times more return on investment than INTERSHOP Communications. However, NXP Semiconductors is 1.35 times more volatile than INTERSHOP Communications Aktiengesellschaft. It trades about -0.01 of its potential returns per unit of risk. INTERSHOP Communications Aktiengesellschaft is currently generating about -0.32 per unit of risk. If you would invest  21,900  in NXP Semiconductors NV on September 4, 2024 and sell it today you would lose (200.00) from holding NXP Semiconductors NV or give up 0.91% of portfolio value over 90 days.

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

NXP Semiconductors NV  vs.  INTERSHOP Communications Aktie

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.

INTERSHOP Communications

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, INTERSHOP Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NXP Semiconductors and INTERSHOP Communications

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

The idea behind NXP Semiconductors NV and INTERSHOP Communications Aktiengesellschaft 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.