Correlation Between ON SEMICONDUCTOR and Air Lease

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

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

Diversification Opportunities for ON SEMICONDUCTOR and Air Lease

0.03

Correlation Coefficient

ON SEMICONDUCTOR  Air Lease

Significant diversification

The 3 months correlation between XS4 and Air is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and Air Lease go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and Air Lease

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to generate 1.69 times more return on investment than Air Lease. However, ON SEMICONDUCTOR is 1.69 times more volatile than Air Lease. It trades about -0.01 of its potential returns per unit of risk. Air Lease is currently generating about -0.09 per unit of risk. If you would invest  6,273  in ON SEMICONDUCTOR on October 11, 2024 and sell it today you would lose (41.00) from holding ON SEMICONDUCTOR or give up 0.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

ON SEMICONDUCTOR  vs.  Air Lease

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Air Lease

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ON SEMICONDUCTOR and Air Lease

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

The idea behind ON SEMICONDUCTOR and Air Lease 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.