Correlation Between Seven West and ON SEMICONDUCTOR

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

By analyzing existing cross correlation between Seven West Media and ON SEMICONDUCTOR, you can compare the effects of market volatilities on Seven West and ON SEMICONDUCTOR 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 Seven West with a short position of ON SEMICONDUCTOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seven West and ON SEMICONDUCTOR.

Diversification Opportunities for Seven West and ON SEMICONDUCTOR

-0.05

Correlation Coefficient

Seven West  ON SEMICONDUCTOR

Good diversification

The 3 months correlation between Seven and XS4 is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media and ON SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON SEMICONDUCTOR and Seven West 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 Seven West Media are associated (or correlated) with ON SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ON SEMICONDUCTOR has no effect on the direction of Seven West i.e., Seven West and ON SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between Seven West and ON SEMICONDUCTOR

Assuming the 90 days horizon Seven West Media is expected to under-perform the ON SEMICONDUCTOR. In addition to that, Seven West is 1.66 times more volatile than ON SEMICONDUCTOR. It trades about -0.03 of its total potential returns per unit of risk. ON SEMICONDUCTOR is currently generating about -0.01 per unit of volatility. If you would invest  7,605  in ON SEMICONDUCTOR on September 19, 2024 and sell it today you would lose (1,156) from holding ON SEMICONDUCTOR or give up 15.2% of portfolio value over 90 days.

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

Seven West Media  vs.  ON SEMICONDUCTOR

Seven West Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven West Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 comparatively stable basic indicators, ON SEMICONDUCTOR is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Seven West and ON SEMICONDUCTOR

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

The idea behind Seven West Media and ON SEMICONDUCTOR 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.