Correlation Between ON Semiconductor and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both ON Semiconductor and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ON Semiconductor and STMicroelectronics NV ADR, you can compare the effects of market volatilities on ON Semiconductor and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ON Semiconductor and STMicroelectronics.
Diversification Opportunities for ON Semiconductor and STMicroelectronics
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ON Semiconductor and STMicroelectronics is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and STMicroelectronics NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics NV ADR 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics NV ADR has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and STMicroelectronics go up and down completely randomly.
Pair Corralation between ON Semiconductor and STMicroelectronics
Allowing for the 90-day total investment horizon ON Semiconductor is expected to generate 1.23 times more return on investment than STMicroelectronics. However, ON Semiconductor is 1.23 times more volatile than STMicroelectronics NV ADR. It trades about -0.03 of its potential returns per unit of risk. STMicroelectronics NV ADR is currently generating about -0.05 per unit of risk. If you would invest 8,141 in ON Semiconductor on January 2, 2025 and sell it today you would lose (4,065) from holding ON Semiconductor or give up 49.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ON Semiconductor vs. STMicroelectronics NV ADR
Performance |
| Timeline |
| ON Semiconductor |
| STMicroelectronics NV ADR |
ON Semiconductor and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ON Semiconductor and STMicroelectronics
The main advantage of trading using opposite ON Semiconductor and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON Semiconductor position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| ON Semiconductor vs. Texas Instruments Incorporated | ON Semiconductor vs. Microchip Technology | ON Semiconductor vs. Analog Devices | ON Semiconductor vs. Qorvo Inc |
| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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