Correlation Between Amkor Technology and ON Semiconductor

Can any of the company-specific risk be diversified away by investing in both Amkor Technology and ON Semiconductor 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 Amkor Technology and ON Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amkor Technology and ON Semiconductor, you can compare the effects of market volatilities on Amkor Technology and ON Semiconductor 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 Amkor Technology with a short position of ON Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amkor Technology and ON Semiconductor.

Diversification Opportunities for Amkor Technology and ON Semiconductor

0.46

Correlation Coefficient

Amkor Technology  ON Semiconductor

Very weak diversification

The 3 months correlation between Amkor and ON Semiconductor is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Amkor Technology and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor and Amkor Technology 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 Amkor Technology are associated (or correlated) with ON Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ON Semiconductor has no effect on the direction of Amkor Technology i.e., Amkor Technology and ON Semiconductor go up and down completely randomly.

Pair Corralation between Amkor Technology and ON Semiconductor

Given the investment horizon of 90 days Amkor Technology is expected to generate 0.7 times more return on investment than ON Semiconductor. However, Amkor Technology is 1.42 times less risky than ON Semiconductor. It trades about -0.07 of its potential returns per unit of risk. ON Semiconductor is currently generating about -0.1 per unit of risk. If you would invest  2,606  in Amkor Technology on September 23, 2024 and sell it today you would lose (79.00) from holding Amkor Technology or give up 3.03% of portfolio value over 90 days.

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

Amkor Technology  vs.  ON Semiconductor

Amkor Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amkor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ON Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ON Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ON Semiconductor is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Amkor Technology and ON Semiconductor

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

The idea behind Amkor Technology and ON Semiconductor 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.