Correlation Between ON SEMICONDUCTOR and Yancoal Australia

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

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

Diversification Opportunities for ON SEMICONDUCTOR and Yancoal Australia

0.57

Correlation Coefficient

ON SEMICONDUCTOR  Yancoal Australia

Very weak diversification

The 3 months correlation between XS4 and Yancoal is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia 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 Yancoal Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yancoal Australia has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and Yancoal Australia go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and Yancoal Australia

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to under-perform the Yancoal Australia. But the stock apears to be less risky and, when comparing its historical volatility, ON SEMICONDUCTOR is 1.23 times less risky than Yancoal Australia. The stock trades about -0.01 of its potential returns per unit of risk. The Yancoal Australia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  251.00  in Yancoal Australia on October 26, 2024 and sell it today you would earn a total of  121.00  from holding Yancoal Australia or generate 48.21% return on investment over 90 days.

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

ON SEMICONDUCTOR  vs.  Yancoal Australia

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.

Yancoal Australia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yancoal Australia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Yancoal Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ON SEMICONDUCTOR and Yancoal Australia

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

The idea behind ON SEMICONDUCTOR and Yancoal Australia 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.