Correlation Between ON SEMICONDUCTOR and VeriSign

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

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

Diversification Opportunities for ON SEMICONDUCTOR and VeriSign

0.21

Correlation Coefficient

ON SEMICONDUCTOR  VeriSign

Modest diversification

The 3 months correlation between XS4 and VeriSign is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign 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 VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and VeriSign go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and VeriSign

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to generate 1.57 times less return on investment than VeriSign. In addition to that, ON SEMICONDUCTOR is 1.2 times more volatile than VeriSign. It trades about 0.04 of its total potential returns per unit of risk. VeriSign is currently generating about 0.08 per unit of volatility. If you would invest  16,290  in VeriSign on September 4, 2024 and sell it today you would earn a total of  1,510  from holding VeriSign or generate 9.27% return on investment over 90 days.

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

ON SEMICONDUCTOR  vs.  VeriSign

ON SEMICONDUCTOR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ON SEMICONDUCTOR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ON SEMICONDUCTOR is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

VeriSign

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VeriSign are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VeriSign may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ON SEMICONDUCTOR and VeriSign

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

The idea behind ON SEMICONDUCTOR and VeriSign 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.