Correlation Between ON Semiconductor and Advanced Micro
Can any of the company-specific risk be diversified away by investing in both ON Semiconductor and Advanced Micro 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 Advanced Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ON Semiconductor and Advanced Micro Devices, you can compare the effects of market volatilities on ON Semiconductor and Advanced Micro 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 Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of ON Semiconductor and Advanced Micro.
Diversification Opportunities for ON Semiconductor and Advanced Micro
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ON Semiconductor and Advanced is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and Advanced Micro go up and down completely randomly.
Pair Corralation between ON Semiconductor and Advanced Micro
Allowing for the 90-day total investment horizon ON Semiconductor is expected to under-perform the Advanced Micro. But the stock apears to be less risky and, when comparing its historical volatility, ON Semiconductor is 1.21 times less risky than Advanced Micro. The stock trades about -0.37 of its potential returns per unit of risk. The Advanced Micro Devices is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest 17,973 in Advanced Micro Devices on January 20, 2024 and sell it today you would lose (2,465) from holding Advanced Micro Devices or give up 13.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ON Semiconductor vs. Advanced Micro Devices
Performance |
| Timeline |
| ON Semiconductor |
| Advanced Micro Devices |
ON Semiconductor and Advanced Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ON Semiconductor and Advanced Micro
The main advantage of trading using opposite ON Semiconductor and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON Semiconductor position performs unexpectedly, Advanced Micro 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 Advanced Micro will offset losses from the drop in Advanced Micro's long position.| ON Semiconductor vs. Texas Instruments Incorporated | ON Semiconductor vs. Microchip Technology | ON Semiconductor vs. Analog Devices | ON Semiconductor vs. Qorvo Inc |
| Advanced Micro vs. Taiwan Semiconductor Manufacturing | Advanced Micro vs. Intel | Advanced Micro vs. Marvell Technology Group | Advanced Micro vs. Micron Technology |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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