Correlation Between ON Semiconductor and Bridgetown Holdings

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

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

Diversification Opportunities for ON Semiconductor and Bridgetown Holdings

-0.23

Correlation Coefficient

ON Semiconductor  Bridgetown Holdings

Very good diversification

The 3 months correlation between ON Semiconductor and Bridgetown is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and Bridgetown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgetown Holdings 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 Bridgetown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgetown Holdings has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and Bridgetown Holdings go up and down completely randomly.

Pair Corralation between ON Semiconductor and Bridgetown Holdings

Allowing for the 90-day total investment horizon ON Semiconductor is expected to generate 19.88 times less return on investment than Bridgetown Holdings. But when comparing it to its historical volatility, ON Semiconductor is 4.68 times less risky than Bridgetown Holdings. It trades about 0.02 of its potential returns per unit of risk. Bridgetown Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Bridgetown Holdings on September 22, 2024 and sell it today you would earn a total of  9.00  from holding Bridgetown Holdings or generate 75.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.02%
Values	Daily Returns

ON Semiconductor  vs.  Bridgetown Holdings

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 current stock price disarray, may contribute to short-term losses for the investors.

Bridgetown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgetown Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Bridgetown Holdings is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ON Semiconductor and Bridgetown Holdings

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

The idea behind ON Semiconductor and Bridgetown Holdings 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.