Correlation Between ON SEMICONDUCTOR and X Fab

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

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

Diversification Opportunities for ON SEMICONDUCTOR and X Fab

-0.34

Correlation Coefficient

ON SEMICONDUCTOR  X Fab

Very good diversification

The 3 months correlation between XS4 and XFB is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and X Fab Silicon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Fab Silicon 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 X Fab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Fab Silicon has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and X Fab go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and X Fab

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to generate 2.02 times less return on investment than X Fab. But when comparing it to its historical volatility, ON SEMICONDUCTOR is 1.23 times less risky than X Fab. It trades about 0.01 of its potential returns per unit of risk. X Fab Silicon is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  484.00  in X Fab Silicon on September 12, 2024 and sell it today you would earn a total of  8.00  from holding X Fab Silicon or generate 1.65% return on investment over 90 days.

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

ON SEMICONDUCTOR  vs.  X Fab Silicon

ON SEMICONDUCTOR

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ON SEMICONDUCTOR are ranked lower than 1 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

X Fab Silicon

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in X Fab Silicon are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, X Fab 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 X Fab

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

The idea behind ON SEMICONDUCTOR and X Fab Silicon 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.