Correlation Between ON SEMICONDUCTOR and Teradyne

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

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

Diversification Opportunities for ON SEMICONDUCTOR and Teradyne

-0.71

Correlation Coefficient

ON SEMICONDUCTOR  Teradyne

Pay attention - limited upside

The 3 months correlation between XS4 and Teradyne is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne 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 Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and Teradyne go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and Teradyne

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to under-perform the Teradyne. In addition to that, ON SEMICONDUCTOR is 1.11 times more volatile than Teradyne. It trades about -0.01 of its total potential returns per unit of risk. Teradyne is currently generating about 0.04 per unit of volatility. If you would invest  9,694  in Teradyne on October 24, 2024 and sell it today you would earn a total of  3,374  from holding Teradyne or generate 34.81% return on investment over 90 days.

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

ON SEMICONDUCTOR  vs.  Teradyne

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 fragile 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.

Teradyne

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Teradyne reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ON SEMICONDUCTOR and Teradyne

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

The idea behind ON SEMICONDUCTOR and Teradyne 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.