Correlation Between Aehr Test and Onto Innovation

Can any of the company-specific risk be diversified away by investing in both Aehr Test and Onto Innovation 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 Aehr Test and Onto Innovation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aehr Test Systems and Onto Innovation, you can compare the effects of market volatilities on Aehr Test and Onto Innovation 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 Aehr Test with a short position of Onto Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aehr Test and Onto Innovation.

Diversification Opportunities for Aehr Test and Onto Innovation

0.52

Correlation Coefficient

Aehr Test  Onto Innovation

Very weak diversification

The 3 months correlation between Aehr and Onto is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Aehr Test Systems and Onto Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onto Innovation and Aehr Test 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 Aehr Test Systems are associated (or correlated) with Onto Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onto Innovation has no effect on the direction of Aehr Test i.e., Aehr Test and Onto Innovation go up and down completely randomly.

Pair Corralation between Aehr Test and Onto Innovation

Given the investment horizon of 90 days Aehr Test Systems is expected to under-perform the Onto Innovation. In addition to that, Aehr Test is 1.38 times more volatile than Onto Innovation. It trades about -0.16 of its total potential returns per unit of risk. Onto Innovation is currently generating about -0.09 per unit of volatility. If you would invest  17,066  in Onto Innovation on December 27, 2024 and sell it today you would lose (4,085) from holding Onto Innovation or give up 23.94% of portfolio value over 90 days.

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

Aehr Test Systems  vs.  Onto Innovation

Aehr Test Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aehr Test Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Onto Innovation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Onto Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Aehr Test and Onto Innovation

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

The idea behind Aehr Test Systems and Onto Innovation 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.