Correlation Between ON SEMICONDUCTOR and SILICON LABORATOR

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

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

Diversification Opportunities for ON SEMICONDUCTOR and SILICON LABORATOR

-0.7

Correlation Coefficient

ON SEMICONDUCTOR  SILICON LABORATOR

Excellent diversification

The 3 months correlation between XS4 and SILICON is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and SILICON LABORATOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SILICON LABORATOR 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 SILICON LABORATOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SILICON LABORATOR has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and SILICON LABORATOR go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and SILICON LABORATOR

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to under-perform the SILICON LABORATOR. In addition to that, ON SEMICONDUCTOR is 1.05 times more volatile than SILICON LABORATOR. It trades about -0.01 of its total potential returns per unit of risk. SILICON LABORATOR is currently generating about 0.0 per unit of volatility. If you would invest  16,700  in SILICON LABORATOR on October 26, 2024 and sell it today you would lose (3,700) from holding SILICON LABORATOR or give up 22.16% of portfolio value over 90 days.

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

ON SEMICONDUCTOR  vs.  SILICON LABORATOR

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.

SILICON LABORATOR

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SILICON LABORATOR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SILICON LABORATOR unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ON SEMICONDUCTOR and SILICON LABORATOR

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

The idea behind ON SEMICONDUCTOR and SILICON LABORATOR 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.