Correlation Between China Aircraft and ON Semiconductor
Can any of the company-specific risk be diversified away by investing in both China Aircraft and ON Semiconductor 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 China Aircraft and ON Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Aircraft Leasing and ON Semiconductor, you can compare the effects of market volatilities on China Aircraft and ON Semiconductor 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 China Aircraft with a short position of ON Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Aircraft and ON Semiconductor.
Diversification Opportunities for China Aircraft and ON Semiconductor
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and ON Semiconductor is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor and China Aircraft 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 China Aircraft Leasing are associated (or correlated) with ON Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ON Semiconductor has no effect on the direction of China Aircraft i.e., China Aircraft and ON Semiconductor go up and down completely randomly.
Pair Corralation between China Aircraft and ON Semiconductor
Assuming the 90 days horizon China Aircraft Leasing is expected to generate 1.44 times more return on investment than ON Semiconductor. However, China Aircraft is 1.44 times more volatile than ON Semiconductor. It trades about 0.08 of its potential returns per unit of risk. ON Semiconductor is currently generating about 0.01 per unit of risk. If you would invest 20.00 in China Aircraft Leasing on September 2, 2024 and sell it today you would earn a total of 20.00 from holding China Aircraft Leasing or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Aircraft Leasing vs. ON Semiconductor
Performance |
| Timeline |
| China Aircraft Leasing |
| ON Semiconductor |
China Aircraft and ON Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Aircraft and ON Semiconductor
The main advantage of trading using opposite China Aircraft and ON Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Aircraft position performs unexpectedly, ON Semiconductor 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 ON Semiconductor will offset losses from the drop in ON Semiconductor's long position.| China Aircraft vs. Ambev SA ADR | China Aircraft vs. Volaris | China Aircraft vs. Copa Holdings SA | China Aircraft vs. Molson Coors Brewing |
| ON Semiconductor vs. Texas Instruments Incorporated | ON Semiconductor vs. Microchip Technology | ON Semiconductor vs. Analog Devices | ON Semiconductor vs. Qorvo Inc |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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