Correlation Between ON Semiconductor and Silicon Laboratories

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

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

Diversification Opportunities for ON Semiconductor and Silicon Laboratories

0.04

Correlation Coefficient

ON Semiconductor  Silicon Laboratories

Significant diversification

The 3 months correlation between ON Semiconductor and Silicon is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories 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 Silicon Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Laboratories has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and Silicon Laboratories go up and down completely randomly.

Pair Corralation between ON Semiconductor and Silicon Laboratories

Allowing for the 90-day total investment horizon ON Semiconductor is expected to under-perform the Silicon Laboratories. In addition to that, ON Semiconductor is 1.11 times more volatile than Silicon Laboratories. It trades about -0.19 of its total potential returns per unit of risk. Silicon Laboratories is currently generating about -0.05 per unit of volatility. If you would invest  12,486  in Silicon Laboratories on December 29, 2024 and sell it today you would lose (1,183) from holding Silicon Laboratories or give up 9.47% of portfolio value over 90 days.

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

ON Semiconductor  vs.  Silicon Laboratories

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.

Silicon Laboratories

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silicon Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Pair Trading with ON Semiconductor and Silicon Laboratories

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

The idea behind ON Semiconductor and Silicon Laboratories 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.