Correlation Between NATIONAL HEALTHCARE and NXP Semiconductors

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

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

Diversification Opportunities for NATIONAL HEALTHCARE and NXP Semiconductors

0.67

Correlation Coefficient

NATIONAL HEALTHCARE  NXP Semiconductors

Poor diversification

The 3 months correlation between NATIONAL and NXP is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NATIONAL HEALTHCARE and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and NATIONAL HEALTHCARE 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 NATIONAL HEALTHCARE 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 NATIONAL HEALTHCARE i.e., NATIONAL HEALTHCARE and NXP Semiconductors go up and down completely randomly.

Pair Corralation between NATIONAL HEALTHCARE and NXP Semiconductors

Assuming the 90 days trading horizon NATIONAL HEALTHCARE is expected to generate 1.97 times less return on investment than NXP Semiconductors. But when comparing it to its historical volatility, NATIONAL HEALTHCARE is 1.41 times less risky than NXP Semiconductors. It trades about 0.13 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  14,930  in NXP Semiconductors NV on April 20, 2025 and sell it today you would earn a total of  4,370  from holding NXP Semiconductors NV or generate 29.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

NATIONAL HEALTHCARE  vs.  NXP Semiconductors NV

NATIONAL HEALTHCARE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NATIONAL HEALTHCARE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NATIONAL HEALTHCARE exhibited solid returns over the last few months and may actually be approaching a breakup point.

NXP Semiconductors

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NXP Semiconductors NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, NXP Semiconductors unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NATIONAL HEALTHCARE and NXP Semiconductors

The main advantage of trading using opposite NATIONAL HEALTHCARE and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NATIONAL HEALTHCARE 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 NATIONAL HEALTHCARE 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.