Correlation Between ON Semiconductor and ASE Industrial

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Can any of the company-specific risk be diversified away by investing in both ON Semiconductor and ASE Industrial 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 ASE Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ON Semiconductor and ASE Industrial Holding, you can compare the effects of market volatilities on ON Semiconductor and ASE Industrial 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 ASE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ON Semiconductor and ASE Industrial.

Diversification Opportunities for ON Semiconductor and ASE Industrial

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between ON Semiconductor and ASE is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding 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 ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and ASE Industrial go up and down completely randomly.

Pair Corralation between ON Semiconductor and ASE Industrial

Allowing for the 90-day total investment horizon ON Semiconductor is expected to under-perform the ASE Industrial. But the stock apears to be less risky and, when comparing its historical volatility, ON Semiconductor is 1.01 times less risky than ASE Industrial. The stock trades about -0.01 of its potential returns per unit of risk. The ASE Industrial Holding is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  960.00  in ASE Industrial Holding on December 29, 2023 and sell it today you would earn a total of  140.00  from holding ASE Industrial Holding or generate 14.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ON Semiconductor  vs.  ASE Industrial Holding

 Performance 
       Timeline  
ON Semiconductor 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
ASE Industrial Holding 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, ASE Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

ON Semiconductor and ASE Industrial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ON Semiconductor and ASE Industrial

The main advantage of trading using opposite ON Semiconductor and ASE Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON Semiconductor position performs unexpectedly, ASE Industrial 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 ASE Industrial will offset losses from the drop in ASE Industrial's long position.
The idea behind ON Semiconductor and ASE Industrial Holding 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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