Correlation Between ON SEMICONDUCTOR and Diamondrock Hospitality

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

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

Diversification Opportunities for ON SEMICONDUCTOR and Diamondrock Hospitality

0.86

Correlation Coefficient

ON SEMICONDUCTOR  Diamondrock Hospitality

Very poor diversification

The 3 months correlation between XS4 and Diamondrock is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and Diamondrock Hospitality Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality 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 Diamondrock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondrock Hospitality has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and Diamondrock Hospitality go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and Diamondrock Hospitality

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to under-perform the Diamondrock Hospitality. In addition to that, ON SEMICONDUCTOR is 1.94 times more volatile than Diamondrock Hospitality Co. It trades about -0.22 of its total potential returns per unit of risk. Diamondrock Hospitality Co is currently generating about -0.15 per unit of volatility. If you would invest  840.00  in Diamondrock Hospitality Co on December 29, 2024 and sell it today you would lose (115.00) from holding Diamondrock Hospitality Co or give up 13.69% of portfolio value over 90 days.

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

ON SEMICONDUCTOR  vs.  Diamondrock Hospitality Co

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.

Diamondrock Hospitality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamondrock Hospitality Co 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.

Pair Trading with ON SEMICONDUCTOR and Diamondrock Hospitality

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

The idea behind ON SEMICONDUCTOR and Diamondrock Hospitality Co 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.