Correlation Between ON SEMICONDUCTOR and KB HOME

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

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

Diversification Opportunities for ON SEMICONDUCTOR and KB HOME

0.4

Correlation Coefficient

ON SEMICONDUCTOR  KB HOME

Very weak diversification

The 3 months correlation between XS4 and KBH is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and KB HOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB HOME 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 KB HOME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB HOME has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and KB HOME go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and KB HOME

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to generate 1.29 times more return on investment than KB HOME. However, ON SEMICONDUCTOR is 1.29 times more volatile than KB HOME. It trades about -0.02 of its potential returns per unit of risk. KB HOME is currently generating about -0.2 per unit of risk. If you would invest  6,388  in ON SEMICONDUCTOR on October 6, 2024 and sell it today you would lose (175.00) from holding ON SEMICONDUCTOR or give up 2.74% of portfolio value over 90 days.

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

ON SEMICONDUCTOR  vs.  KB HOME

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

KB HOME

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KB HOME 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.

Pair Trading with ON SEMICONDUCTOR and KB HOME

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

The idea behind ON SEMICONDUCTOR and KB HOME 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 Stocks Directory module to find actively traded stocks across global markets.