Correlation Between FARO Technologies and ON SEMICONDUCTOR
Can any of the company-specific risk be diversified away by investing in both FARO Technologies 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 FARO Technologies and ON SEMICONDUCTOR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and ON SEMICONDUCTOR, you can compare the effects of market volatilities on FARO Technologies 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 FARO Technologies with a short position of ON SEMICONDUCTOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and ON SEMICONDUCTOR.
Diversification Opportunities for FARO Technologies and ON SEMICONDUCTOR
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FARO and XS4 is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and ON SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON SEMICONDUCTOR and FARO Technologies 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 FARO Technologies 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 FARO Technologies i.e., FARO Technologies and ON SEMICONDUCTOR go up and down completely randomly.
Pair Corralation between FARO Technologies and ON SEMICONDUCTOR
Assuming the 90 days horizon FARO Technologies is expected to generate 1.27 times more return on investment than ON SEMICONDUCTOR. However, FARO Technologies is 1.27 times more volatile than ON SEMICONDUCTOR. It trades about 0.06 of its potential returns per unit of risk. ON SEMICONDUCTOR is currently generating about 0.01 per unit of risk. If you would invest 1,660 in FARO Technologies on September 14, 2024 and sell it today you would earn a total of 920.00 from holding FARO Technologies or generate 55.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FARO Technologies vs. ON SEMICONDUCTOR
Performance |
| Timeline |
| FARO Technologies |
| ON SEMICONDUCTOR |
FARO Technologies and ON SEMICONDUCTOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and ON SEMICONDUCTOR
The main advantage of trading using opposite FARO Technologies and ON SEMICONDUCTOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies 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.| FARO Technologies vs. HEXAGON AB ADR1 | FARO Technologies vs. Superior Plus Corp | FARO Technologies vs. SIVERS SEMICONDUCTORS AB | FARO Technologies vs. NorAm Drilling AS |
| ON SEMICONDUCTOR vs. Apple Inc | ON SEMICONDUCTOR vs. Apple Inc | ON SEMICONDUCTOR vs. Apple Inc | ON SEMICONDUCTOR vs. Apple 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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