Correlation Between Fast Retailing and ON SEMICONDUCTOR

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Can any of the company-specific risk be diversified away by investing in both Fast Retailing 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 Fast Retailing and ON SEMICONDUCTOR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and ON SEMICONDUCTOR, you can compare the effects of market volatilities on Fast Retailing 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 Fast Retailing with a short position of ON SEMICONDUCTOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and ON SEMICONDUCTOR.

Diversification Opportunities for Fast Retailing and ON SEMICONDUCTOR

FastXS4Diversified AwayFastXS4Diversified Away100%
0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Fast and XS4 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and ON SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON SEMICONDUCTOR and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and ON SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between Fast Retailing and ON SEMICONDUCTOR

Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.58 times more return on investment than ON SEMICONDUCTOR. However, Fast Retailing Co is 1.73 times less risky than ON SEMICONDUCTOR. It trades about 0.1 of its potential returns per unit of risk. ON SEMICONDUCTOR is currently generating about -0.08 per unit of risk. If you would invest  29,760  in Fast Retailing Co on November 20, 2024 and sell it today you would earn a total of  890.00  from holding Fast Retailing Co or generate 2.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Fast Retailing Co  vs.  ON SEMICONDUCTOR

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 010203040
JavaScript chart by amCharts 3.21.15FR7 XS4
       Timeline  
Fast Retailing 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Fast Retailing is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb295300305310315320325330335
ON SEMICONDUCTOR 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days ON SEMICONDUCTOR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb455055606570

Fast Retailing and ON SEMICONDUCTOR Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.97-4.47-2.97-1.470.01.483.024.556.087.62 0.020.040.060.080.10
JavaScript chart by amCharts 3.21.15FR7 XS4
       Returns  

Pair Trading with Fast Retailing and ON SEMICONDUCTOR

The main advantage of trading using opposite Fast Retailing and ON SEMICONDUCTOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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.
The idea behind Fast Retailing Co and ON SEMICONDUCTOR 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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