Correlation Between DFS Furniture and NXP Semiconductors

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

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

Diversification Opportunities for DFS Furniture and NXP Semiconductors

0.6

Correlation Coefficient

DFS Furniture  NXP Semiconductors

Poor diversification

The 3 months correlation between DFS and NXP is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors and DFS Furniture 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 DFS Furniture PLC 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 DFS Furniture i.e., DFS Furniture and NXP Semiconductors go up and down completely randomly.

Pair Corralation between DFS Furniture and NXP Semiconductors

Assuming the 90 days trading horizon DFS Furniture is expected to generate 1.21 times less return on investment than NXP Semiconductors. But when comparing it to its historical volatility, DFS Furniture PLC is 1.2 times less risky than NXP Semiconductors. It trades about 0.16 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  15,975  in NXP Semiconductors NV on May 1, 2025 and sell it today you would earn a total of  3,725  from holding NXP Semiconductors NV or generate 23.32% return on investment over 90 days.

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

DFS Furniture PLC  vs.  NXP Semiconductors NV

DFS Furniture PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DFS Furniture unveiled 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 12 (%) 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 DFS Furniture and NXP Semiconductors

The main advantage of trading using opposite DFS Furniture and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture 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 DFS Furniture PLC 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 Commodity Directory module to find actively traded commodities issued by global exchanges.