Correlation Between ON Semiconductor and WEBTOON Entertainment

Can any of the company-specific risk be diversified away by investing in both ON Semiconductor and WEBTOON Entertainment 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 WEBTOON Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ON Semiconductor and WEBTOON Entertainment Common, you can compare the effects of market volatilities on ON Semiconductor and WEBTOON Entertainment 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 WEBTOON Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ON Semiconductor and WEBTOON Entertainment.

Diversification Opportunities for ON Semiconductor and WEBTOON Entertainment

-0.3

Correlation Coefficient

ON Semiconductor  WEBTOON Entertainment

Very good diversification

The 3 months correlation between ON Semiconductor and WEBTOON is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and WEBTOON Entertainment Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEBTOON Entertainment 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 WEBTOON Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEBTOON Entertainment has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and WEBTOON Entertainment go up and down completely randomly.

Pair Corralation between ON Semiconductor and WEBTOON Entertainment

Allowing for the 90-day total investment horizon ON Semiconductor is expected to generate 0.52 times more return on investment than WEBTOON Entertainment. However, ON Semiconductor is 1.93 times less risky than WEBTOON Entertainment. It trades about 0.01 of its potential returns per unit of risk. WEBTOON Entertainment Common is currently generating about -0.06 per unit of risk. If you would invest  7,068  in ON Semiconductor on September 15, 2024 and sell it today you would lose (472.00) from holding ON Semiconductor or give up 6.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.24%
Values	Daily Returns

ON Semiconductor  vs.  WEBTOON Entertainment Common

ON Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ON Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ON Semiconductor is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

WEBTOON Entertainment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WEBTOON Entertainment Common are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, WEBTOON Entertainment displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ON Semiconductor and WEBTOON Entertainment

The main advantage of trading using opposite ON Semiconductor and WEBTOON Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON Semiconductor position performs unexpectedly, WEBTOON Entertainment 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 WEBTOON Entertainment will offset losses from the drop in WEBTOON Entertainment's long position.

The idea behind ON Semiconductor and WEBTOON Entertainment Common 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.