Correlation Between ON Semiconductor and Initio

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

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

Diversification Opportunities for ON Semiconductor and Initio

0.88

Correlation Coefficient

ON Semiconductor  Initio

Very poor diversification

The 3 months correlation between ON Semiconductor and Initio is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and Initio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Initio Inc 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 Initio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Initio Inc has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and Initio go up and down completely randomly.

Pair Corralation between ON Semiconductor and Initio

Allowing for the 90-day total investment horizon ON Semiconductor is expected to under-perform the Initio. In addition to that, ON Semiconductor is 1.38 times more volatile than Initio Inc. It trades about -0.21 of its total potential returns per unit of risk. Initio Inc is currently generating about -0.13 per unit of volatility. If you would invest  42.00  in Initio Inc on December 4, 2024 and sell it today you would lose (7.00) from holding Initio Inc or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.65%
Values	Daily Returns

ON Semiconductor  vs.  Initio Inc

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.

Initio Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Initio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal 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 ON Semiconductor and Initio

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

The idea behind ON Semiconductor and Initio Inc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.