Correlation Between ON SEMICONDUCTOR and SK TELECOM

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

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

Diversification Opportunities for ON SEMICONDUCTOR and SK TELECOM

0.49

Correlation Coefficient

ON SEMICONDUCTOR  SK TELECOM

Very weak diversification

The 3 months correlation between XS4 and KMBA is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and SK TELECOM TDADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK TELECOM TDADR 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 SK TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK TELECOM TDADR has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and SK TELECOM go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and SK TELECOM

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to under-perform the SK TELECOM. In addition to that, ON SEMICONDUCTOR is 1.96 times more volatile than SK TELECOM TDADR. It trades about -0.26 of its total potential returns per unit of risk. SK TELECOM TDADR is currently generating about -0.09 per unit of volatility. If you would invest  2,080  in SK TELECOM TDADR on December 19, 2024 and sell it today you would lose (170.00) from holding SK TELECOM TDADR or give up 8.17% 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.  SK TELECOM TDADR

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.

SK TELECOM TDADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days SK TELECOM TDADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ON SEMICONDUCTOR and SK TELECOM

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

The idea behind ON SEMICONDUCTOR and SK TELECOM TDADR 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.