Correlation Between ChipMOS Technologies and Onto Innovation

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

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

Diversification Opportunities for ChipMOS Technologies and Onto Innovation

0.85

Correlation Coefficient

ChipMOS Technologies  Onto Innovation

Very poor diversification

The 3 months correlation between ChipMOS and Onto is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ChipMOS Technologies and Onto Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onto Innovation and ChipMOS Technologies 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 ChipMOS Technologies 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 ChipMOS Technologies i.e., ChipMOS Technologies and Onto Innovation go up and down completely randomly.

Pair Corralation between ChipMOS Technologies and Onto Innovation

Given the investment horizon of 90 days ChipMOS Technologies is expected to under-perform the Onto Innovation. But the stock apears to be less risky and, when comparing its historical volatility, ChipMOS Technologies is 2.19 times less risky than Onto Innovation. The stock trades about -0.11 of its potential returns per unit of risk. The Onto Innovation is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  18,788  in Onto Innovation on September 4, 2024 and sell it today you would lose (1,703) from holding Onto Innovation or give up 9.06% of portfolio value over 90 days.

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

ChipMOS Technologies  vs.  Onto Innovation

ChipMOS Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChipMOS Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Onto Innovation

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, Onto Innovation is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ChipMOS Technologies and Onto Innovation

The main advantage of trading using opposite ChipMOS Technologies and Onto Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChipMOS Technologies 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 ChipMOS Technologies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.