Correlation Between ON Semiconductor and Socket Mobile

Can any of the company-specific risk be diversified away by investing in both ON Semiconductor and Socket 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 Socket 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 Socket Mobile, you can compare the effects of market volatilities on ON Semiconductor and Socket 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 Socket Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of ON Semiconductor and Socket Mobile.

Diversification Opportunities for ON Semiconductor and Socket Mobile

-0.38

Correlation Coefficient

ON Semiconductor  Socket Mobile

Very good diversification

The 3 months correlation between ON Semiconductor and Socket is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and Socket Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socket 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 Socket Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socket Mobile has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and Socket Mobile go up and down completely randomly.

Pair Corralation between ON Semiconductor and Socket Mobile

Allowing for the 90-day total investment horizon ON Semiconductor is expected to under-perform the Socket Mobile. But the stock apears to be less risky and, when comparing its historical volatility, ON Semiconductor is 1.63 times less risky than Socket Mobile. The stock trades about -0.02 of its potential returns per unit of risk. The Socket Mobile is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Socket Mobile on September 13, 2024 and sell it today you would earn a total of  28.00  from holding Socket Mobile or generate 23.93% return on investment over 90 days.

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

ON Semiconductor  vs.  Socket 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. In spite of very healthy basic indicators, ON Semiconductor is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Socket Mobile

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Socket Mobile are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking signals, Socket Mobile unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ON Semiconductor and Socket Mobile

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

The idea behind ON Semiconductor and Socket 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.