Correlation Between Advanced Micro and ON Semiconductor
Can any of the company-specific risk be diversified away by investing in both Advanced Micro 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 Advanced Micro and ON Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Micro Devices and ON Semiconductor, you can compare the effects of market volatilities on Advanced Micro 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 Advanced Micro with a short position of ON Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Micro and ON Semiconductor.
Diversification Opportunities for Advanced Micro and ON Semiconductor
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Advanced and ON Semiconductor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor and Advanced Micro 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 Advanced Micro Devices 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 Advanced Micro i.e., Advanced Micro and ON Semiconductor go up and down completely randomly.
Pair Corralation between Advanced Micro and ON Semiconductor
Considering the 90-day investment horizon Advanced Micro Devices is expected to generate 1.07 times more return on investment than ON Semiconductor. However, Advanced Micro is 1.07 times more volatile than ON Semiconductor. It trades about 0.09 of its potential returns per unit of risk. ON Semiconductor is currently generating about -0.01 per unit of risk. If you would invest 8,594 in Advanced Micro Devices on January 21, 2024 and sell it today you would earn a total of 6,070 from holding Advanced Micro Devices or generate 70.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Micro Devices vs. ON Semiconductor
Performance |
| Timeline |
| Advanced Micro Devices |
| ON Semiconductor |
Advanced Micro and ON Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Micro and ON Semiconductor
The main advantage of trading using opposite Advanced Micro and ON Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Micro 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.| Advanced Micro vs. Taiwan Semiconductor Manufacturing | Advanced Micro vs. Intel | Advanced Micro vs. Marvell Technology Group | Advanced Micro vs. Micron Technology |
| ON Semiconductor vs. Texas Instruments Incorporated | ON Semiconductor vs. Microchip Technology | ON Semiconductor vs. Analog Devices | ON Semiconductor vs. Qorvo Inc |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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