Correlation Between ON SEMICONDUCTOR and ZTO EXPRESS

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

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

Diversification Opportunities for ON SEMICONDUCTOR and ZTO EXPRESS

-0.06

Correlation Coefficient

ON SEMICONDUCTOR  ZTO EXPRESS

Good diversification

The 3 months correlation between XS4 and ZTO is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and ZTO EXPRESS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTO EXPRESS 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 ZTO EXPRESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTO EXPRESS has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and ZTO EXPRESS go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and ZTO EXPRESS

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to under-perform the ZTO EXPRESS. In addition to that, ON SEMICONDUCTOR is 1.81 times more volatile than ZTO EXPRESS. It trades about -0.07 of its total potential returns per unit of risk. ZTO EXPRESS is currently generating about 0.12 per unit of volatility. If you would invest  1,820  in ZTO EXPRESS on September 26, 2024 and sell it today you would earn a total of  60.00  from holding ZTO EXPRESS or generate 3.3% 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.  ZTO EXPRESS

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 comparatively stable basic indicators, ON SEMICONDUCTOR is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ZTO EXPRESS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZTO EXPRESS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ON SEMICONDUCTOR and ZTO EXPRESS

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

The idea behind ON SEMICONDUCTOR and ZTO EXPRESS 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.