Correlation Between ON SEMICONDUCTOR and American Airlines
Can any of the company-specific risk be diversified away by investing in both ON SEMICONDUCTOR and American Airlines 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 American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ON SEMICONDUCTOR and American Airlines Group, you can compare the effects of market volatilities on ON SEMICONDUCTOR and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of ON SEMICONDUCTOR and American Airlines.
Diversification Opportunities for ON SEMICONDUCTOR and American Airlines
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between XS4 and American is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and American Airlines go up and down completely randomly.
Pair Corralation between ON SEMICONDUCTOR and American Airlines
Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to generate 1.34 times less return on investment than American Airlines. In addition to that, ON SEMICONDUCTOR is 1.12 times more volatile than American Airlines Group. It trades about 0.02 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.03 per unit of volatility. If you would invest 1,168 in American Airlines Group on September 19, 2024 and sell it today you would earn a total of 370.00 from holding American Airlines Group or generate 31.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ON SEMICONDUCTOR vs. American Airlines Group
Performance |
| Timeline |
| ON SEMICONDUCTOR |
| American Airlines |
ON SEMICONDUCTOR and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ON SEMICONDUCTOR and American Airlines
The main advantage of trading using opposite ON SEMICONDUCTOR and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON SEMICONDUCTOR position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| ON SEMICONDUCTOR vs. Apple Inc | ON SEMICONDUCTOR vs. Apple Inc | ON SEMICONDUCTOR vs. Apple Inc | ON SEMICONDUCTOR vs. Apple Inc |
| American Airlines vs. United Insurance Holdings | American Airlines vs. Direct Line Insurance | American Airlines vs. Luckin Coffee | American Airlines vs. ON 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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