Correlation Between CHINA SOUTHN and NXP Semiconductors

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

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

Diversification Opportunities for CHINA SOUTHN and NXP Semiconductors

0.51

Correlation Coefficient

CHINA SOUTHN  NXP Semiconductors

Very weak diversification

The 3 months correlation between CHINA and NXP is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and CHINA SOUTHN 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 CHINA SOUTHN AIR H 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 CHINA SOUTHN i.e., CHINA SOUTHN and NXP Semiconductors go up and down completely randomly.

Pair Corralation between CHINA SOUTHN and NXP Semiconductors

Assuming the 90 days trading horizon CHINA SOUTHN is expected to generate 3.95 times less return on investment than NXP Semiconductors. But when comparing it to its historical volatility, CHINA SOUTHN AIR H is 1.01 times less risky than NXP Semiconductors. It trades about 0.05 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 21, 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	Weak
Accuracy	100.0%
Values	Daily Returns

CHINA SOUTHN AIR H   vs.  NXP Semiconductors NV

CHINA SOUTHN AIR

Risk-Adjusted Performance

Insignificant

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

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 CHINA SOUTHN and NXP Semiconductors

The main advantage of trading using opposite CHINA SOUTHN and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA SOUTHN 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 CHINA SOUTHN AIR H 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.