Correlation Between Dennys Corp and ON Semiconductor

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

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

Diversification Opportunities for Dennys Corp and ON Semiconductor

0.68

Correlation Coefficient

Dennys Corp  ON Semiconductor

Poor diversification

The 3 months correlation between Dennys and ON Semiconductor is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dennys Corp and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor and Dennys Corp 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 Dennys Corp 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 Dennys Corp i.e., Dennys Corp and ON Semiconductor go up and down completely randomly.

Pair Corralation between Dennys Corp and ON Semiconductor

Given the investment horizon of 90 days Dennys Corp is expected to under-perform the ON Semiconductor. In addition to that, Dennys Corp is 1.52 times more volatile than ON Semiconductor. It trades about -0.13 of its total potential returns per unit of risk. ON Semiconductor is currently generating about -0.19 per unit of volatility. If you would invest  6,346  in ON Semiconductor on December 29, 2024 and sell it today you would lose (1,970) from holding ON Semiconductor or give up 31.04% of portfolio value over 90 days.

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

Dennys Corp  vs.  ON Semiconductor

Dennys Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dennys Corp 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.

ON Semiconductor

Risk-Adjusted Performance

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 unfluctuating 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 Dennys Corp and ON Semiconductor

The main advantage of trading using opposite Dennys Corp and ON Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dennys Corp 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 Dennys Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.