Correlation Between Veeco Instruments and Onto Innovation

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

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

Diversification Opportunities for Veeco Instruments and Onto Innovation

0.78

Correlation Coefficient

Veeco Instruments  Onto Innovation

Poor diversification

The 3 months correlation between Veeco and Onto is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Veeco Instruments and Onto Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onto Innovation and Veeco Instruments 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 Veeco Instruments are associated (or correlated) with Onto Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onto Innovation has no effect on the direction of Veeco Instruments i.e., Veeco Instruments and Onto Innovation go up and down completely randomly.

Pair Corralation between Veeco Instruments and Onto Innovation

Given the investment horizon of 90 days Veeco Instruments is expected to under-perform the Onto Innovation. But the stock apears to be less risky and, when comparing its historical volatility, Veeco Instruments is 1.6 times less risky than Onto Innovation. The stock trades about -0.15 of its potential returns per unit of risk. The Onto Innovation is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  16,780  in Onto Innovation on December 28, 2024 and sell it today you would lose (3,938) from holding Onto Innovation or give up 23.47% of portfolio value over 90 days.

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

Veeco Instruments  vs.  Onto Innovation

Veeco Instruments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Veeco Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental 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.

Onto Innovation

Risk-Adjusted Performance

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 uncertain 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 Veeco Instruments and Onto Innovation

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

The idea behind Veeco Instruments and Onto Innovation 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.