Correlation Between ON SEMICONDUCTOR and Aqua America

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

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

Diversification Opportunities for ON SEMICONDUCTOR and Aqua America

-0.18

Correlation Coefficient

ON SEMICONDUCTOR  Aqua America

Good diversification

The 3 months correlation between XS4 and Aqua is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and Aqua America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua America 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 Aqua America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua America has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and Aqua America go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and Aqua America

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to under-perform the Aqua America. In addition to that, ON SEMICONDUCTOR is 1.46 times more volatile than Aqua America. It trades about -0.25 of its total potential returns per unit of risk. Aqua America is currently generating about 0.05 per unit of volatility. If you would invest  3,456  in Aqua America on December 20, 2024 and sell it today you would earn a total of  176.00  from holding Aqua America or generate 5.09% return on investment over 90 days.

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

ON SEMICONDUCTOR  vs.  Aqua America

ON SEMICONDUCTOR

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Aqua America

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aqua America are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Aqua America may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ON SEMICONDUCTOR and Aqua America

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

The idea behind ON SEMICONDUCTOR and Aqua America 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.