Correlation Between ON Semiconductor and T Mobile

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

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

Diversification Opportunities for ON Semiconductor and T Mobile

0.44

Correlation Coefficient

ON Semiconductor  T Mobile

Very weak diversification

The 3 months correlation between O2NS34 and T1MU34 is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile 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 T Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Mobile has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and T Mobile go up and down completely randomly.

Pair Corralation between ON Semiconductor and T Mobile

Assuming the 90 days trading horizon ON Semiconductor is expected to under-perform the T Mobile. In addition to that, ON Semiconductor is 2.18 times more volatile than T Mobile. It trades about -0.35 of its total potential returns per unit of risk. T Mobile is currently generating about -0.13 per unit of volatility. If you would invest  68,658  in T Mobile on October 23, 2024 and sell it today you would lose (2,358) from holding T Mobile or give up 3.43% of portfolio value over 90 days.

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

ON Semiconductor  vs.  T Mobile

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.

T Mobile

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, T Mobile may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ON Semiconductor and T Mobile

The main advantage of trading using opposite ON Semiconductor and T Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON Semiconductor position performs unexpectedly, T Mobile 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 T Mobile will offset losses from the drop in T Mobile's long position.

The idea behind ON Semiconductor and T Mobile 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.