Correlation Between ON SEMICONDUCTOR and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both ON SEMICONDUCTOR and Sumitomo Chemical 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 Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ON SEMICONDUCTOR and Sumitomo Chemical, you can compare the effects of market volatilities on ON SEMICONDUCTOR and Sumitomo Chemical 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of ON SEMICONDUCTOR and Sumitomo Chemical.
Diversification Opportunities for ON SEMICONDUCTOR and Sumitomo Chemical
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between XS4 and Sumitomo is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between ON SEMICONDUCTOR and Sumitomo Chemical
Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to generate 1.08 times more return on investment than Sumitomo Chemical. However, ON SEMICONDUCTOR is 1.08 times more volatile than Sumitomo Chemical. It trades about 0.01 of its potential returns per unit of risk. Sumitomo Chemical is currently generating about 0.01 per unit of risk. If you would invest 6,733 in ON SEMICONDUCTOR on August 27, 2024 and sell it today you would lose (118.00) from holding ON SEMICONDUCTOR or give up 1.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ON SEMICONDUCTOR vs. Sumitomo Chemical
Performance |
| Timeline |
| ON SEMICONDUCTOR |
| Sumitomo Chemical |
ON SEMICONDUCTOR and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ON SEMICONDUCTOR and Sumitomo Chemical
The main advantage of trading using opposite ON SEMICONDUCTOR and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON SEMICONDUCTOR position performs unexpectedly, Sumitomo Chemical 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.| ON SEMICONDUCTOR vs. Marie Brizard Wine | ON SEMICONDUCTOR vs. Science Applications International | ON SEMICONDUCTOR vs. Data3 Limited | ON SEMICONDUCTOR vs. Public Storage |
| Sumitomo Chemical vs. Sociedad Qumica y | Sumitomo Chemical vs. Superior Plus Corp | Sumitomo Chemical vs. NMI Holdings | Sumitomo Chemical vs. Origin Agritech |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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