Correlation Between ON SEMICONDUCTOR and Geely Automobile

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

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

Diversification Opportunities for ON SEMICONDUCTOR and Geely Automobile

-0.08

Correlation Coefficient

ON SEMICONDUCTOR  Geely Automobile

Good diversification

The 3 months correlation between XS4 and Geely is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and Geely Automobile Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geely Automobile Holdings 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 Geely Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geely Automobile Holdings has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and Geely Automobile go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and Geely Automobile

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to under-perform the Geely Automobile. In addition to that, ON SEMICONDUCTOR is 1.97 times more volatile than Geely Automobile Holdings. It trades about -0.29 of its total potential returns per unit of risk. Geely Automobile Holdings is currently generating about -0.09 per unit of volatility. If you would invest  185.00  in Geely Automobile Holdings on October 25, 2024 and sell it today you would lose (5.00) from holding Geely Automobile Holdings or give up 2.7% of portfolio value over 90 days.

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

ON SEMICONDUCTOR  vs.  Geely Automobile Holdings

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

Geely Automobile Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Geely Automobile is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ON SEMICONDUCTOR and Geely Automobile

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

The idea behind ON SEMICONDUCTOR and Geely Automobile Holdings 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.