Correlation Between ON SEMICONDUCTOR and Rio Tinto

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

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

Diversification Opportunities for ON SEMICONDUCTOR and Rio Tinto

-0.59

Correlation Coefficient

ON SEMICONDUCTOR  Rio Tinto

Excellent diversification

The 3 months correlation between XS4 and Rio is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and Rio Tinto Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto Group 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 Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto Group has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and Rio Tinto go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and Rio Tinto

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to under-perform the Rio Tinto. In addition to that, ON SEMICONDUCTOR is 1.76 times more volatile than Rio Tinto Group. It trades about -0.22 of its total potential returns per unit of risk. Rio Tinto Group is currently generating about 0.06 per unit of volatility. If you would invest  5,454  in Rio Tinto Group on December 28, 2024 and sell it today you would earn a total of  296.00  from holding Rio Tinto Group or generate 5.43% return on investment over 90 days.

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

ON SEMICONDUCTOR  vs.  Rio Tinto Group

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 uncertain 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.

Rio Tinto Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Rio Tinto is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ON SEMICONDUCTOR and Rio Tinto

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

The idea behind ON SEMICONDUCTOR and Rio Tinto Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.