Correlation Between ON Semiconductor and Sun Life

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

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

Diversification Opportunities for ON Semiconductor and Sun Life

-0.4

Correlation Coefficient

ON Semiconductor  Sun Life

Very good diversification

The 3 months correlation between ON Semiconductor and Sun is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial 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 Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and Sun Life go up and down completely randomly.

Pair Corralation between ON Semiconductor and Sun Life

Allowing for the 90-day total investment horizon ON Semiconductor is expected to under-perform the Sun Life. In addition to that, ON Semiconductor is 2.76 times more volatile than Sun Life Financial. It trades about -0.02 of its total potential returns per unit of risk. Sun Life Financial is currently generating about 0.14 per unit of volatility. If you would invest  5,597  in Sun Life Financial on September 14, 2024 and sell it today you would earn a total of  449.00  from holding Sun Life Financial or generate 8.02% return on investment over 90 days.

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

ON Semiconductor  vs.  Sun Life Financial

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

Sun Life Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ON Semiconductor and Sun Life

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

The idea behind ON Semiconductor and Sun Life Financial 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.