Correlation Between ON SEMICONDUCTOR and Algonquin Power

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

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

Diversification Opportunities for ON SEMICONDUCTOR and Algonquin Power

-0.22

Correlation Coefficient

ON SEMICONDUCTOR  Algonquin Power

Very good diversification

The 3 months correlation between XS4 and Algonquin is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities 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 Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and Algonquin Power go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and Algonquin Power

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to generate 1.44 times more return on investment than Algonquin Power. However, ON SEMICONDUCTOR is 1.44 times more volatile than Algonquin Power Utilities. It trades about 0.04 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.0 per unit of risk. If you would invest  6,402  in ON SEMICONDUCTOR on September 4, 2024 and sell it today you would earn a total of  315.00  from holding ON SEMICONDUCTOR or generate 4.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

ON SEMICONDUCTOR  vs.  Algonquin Power Utilities

ON SEMICONDUCTOR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ON SEMICONDUCTOR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ON SEMICONDUCTOR is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Algonquin Power Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algonquin Power Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Algonquin Power is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ON SEMICONDUCTOR and Algonquin Power

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

The idea behind ON SEMICONDUCTOR and Algonquin Power Utilities 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.