Correlation Between ON Semiconductor and Paycom Software

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

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

Diversification Opportunities for ON Semiconductor and Paycom Software

0.28

Correlation Coefficient

ON Semiconductor  Paycom Software

Modest diversification

The 3 months correlation between O2NS34 and Paycom is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and Paycom Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycom Software and ON Semiconductor 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 ON Semiconductor are associated (or correlated) with Paycom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paycom Software has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and Paycom Software go up and down completely randomly.

Pair Corralation between ON Semiconductor and Paycom Software

Assuming the 90 days trading horizon ON Semiconductor is expected to under-perform the Paycom Software. In addition to that, ON Semiconductor is 1.35 times more volatile than Paycom Software. It trades about -0.35 of its total potential returns per unit of risk. Paycom Software is currently generating about -0.28 per unit of volatility. If you would invest  4,590  in Paycom Software on October 23, 2024 and sell it today you would lose (498.00) from holding Paycom Software or give up 10.85% of portfolio value over 90 days.

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

ON Semiconductor  vs.  Paycom Software

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. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Paycom Software

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Software are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Paycom Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ON Semiconductor and Paycom Software

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

The idea behind ON Semiconductor and Paycom Software 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.