Correlation Between Intel and ON Semiconductor
Can any of the company-specific risk be diversified away by investing in both Intel 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 Intel and ON Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intel and ON Semiconductor, you can compare the effects of market volatilities on Intel 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 Intel with a short position of ON Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and ON Semiconductor.
Diversification Opportunities for Intel and ON Semiconductor
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Intel and ON Semiconductor is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Intel and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor and Intel 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 Intel 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 Intel i.e., Intel and ON Semiconductor go up and down completely randomly.
Pair Corralation between Intel and ON Semiconductor
Given the investment horizon of 90 days Intel is expected to under-perform the ON Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Intel is 1.29 times less risky than ON Semiconductor. The stock trades about -0.01 of its potential returns per unit of risk. The ON Semiconductor is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,892 in ON Semiconductor on January 24, 2024 and sell it today you would earn a total of 173.00 from holding ON Semiconductor or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Intel vs. ON Semiconductor
Performance |
| Timeline |
| Intel |
| ON Semiconductor |
Intel and ON Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intel and ON Semiconductor
The main advantage of trading using opposite Intel and ON Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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 Intel 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.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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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