Correlation Between Onto Innovation and Solitron Devices

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

By analyzing existing cross correlation between Onto Innovation and Solitron Devices, you can compare the effects of market volatilities on Onto Innovation and Solitron Devices 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 Onto Innovation with a short position of Solitron Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Onto Innovation and Solitron Devices.

Diversification Opportunities for Onto Innovation and Solitron Devices

0.61

Correlation Coefficient

Onto Innovation  Solitron Devices

Poor diversification

The 3 months correlation between Onto and Solitron is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Onto Innovation and Solitron Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitron Devices and Onto Innovation 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 Onto Innovation are associated (or correlated) with Solitron Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitron Devices has no effect on the direction of Onto Innovation i.e., Onto Innovation and Solitron Devices go up and down completely randomly.

Pair Corralation between Onto Innovation and Solitron Devices

Given the investment horizon of 90 days Onto Innovation is expected to generate 1.06 times more return on investment than Solitron Devices. However, Onto Innovation is 1.06 times more volatile than Solitron Devices. It trades about 0.07 of its potential returns per unit of risk. Solitron Devices is currently generating about 0.05 per unit of risk. If you would invest  7,244  in Onto Innovation on September 5, 2024 and sell it today you would earn a total of  10,015  from holding Onto Innovation or generate 138.25% return on investment over 90 days.

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

Onto Innovation  vs.  Solitron Devices

Onto Innovation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Onto Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Onto Innovation is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Solitron Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solitron Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Onto Innovation and Solitron Devices

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

The idea behind Onto Innovation and Solitron Devices 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.