Correlation Between ON SEMICONDUCTOR and Scandinavian Tobacco

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

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

Diversification Opportunities for ON SEMICONDUCTOR and Scandinavian Tobacco

0.2

Correlation Coefficient

ON SEMICONDUCTOR  Scandinavian Tobacco

Modest diversification

The 3 months correlation between XS4 and Scandinavian is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and Scandinavian Tobacco

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to under-perform the Scandinavian Tobacco. In addition to that, ON SEMICONDUCTOR is 2.38 times more volatile than Scandinavian Tobacco Group. It trades about -0.3 of its total potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.25 per unit of volatility. If you would invest  1,242  in Scandinavian Tobacco Group on October 22, 2024 and sell it today you would earn a total of  70.00  from holding Scandinavian Tobacco Group or generate 5.64% return on investment over 90 days.

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

ON SEMICONDUCTOR  vs.  Scandinavian Tobacco Group

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Scandinavian Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ON SEMICONDUCTOR and Scandinavian Tobacco

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

The idea behind ON SEMICONDUCTOR and Scandinavian Tobacco Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.