Correlation Between ON SEMICONDUCTOR and LVMH Mot

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

By analyzing existing cross correlation between ON SEMICONDUCTOR and LVMH Mot Hennessy, you can compare the effects of market volatilities on ON SEMICONDUCTOR and LVMH Mot 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 LVMH Mot. Check out your portfolio center. Please also check ongoing floating volatility patterns of ON SEMICONDUCTOR and LVMH Mot.

Diversification Opportunities for ON SEMICONDUCTOR and LVMH Mot

-0.03

Correlation Coefficient

ON SEMICONDUCTOR  LVMH Mot

Good diversification

The 3 months correlation between XS4 and LVMH is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding ON SEMICONDUCTOR and LVMH Mot Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Mot Hennessy 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 LVMH Mot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Mot Hennessy has no effect on the direction of ON SEMICONDUCTOR i.e., ON SEMICONDUCTOR and LVMH Mot go up and down completely randomly.

Pair Corralation between ON SEMICONDUCTOR and LVMH Mot

Assuming the 90 days trading horizon ON SEMICONDUCTOR is expected to generate 27.76 times less return on investment than LVMH Mot. In addition to that, ON SEMICONDUCTOR is 1.68 times more volatile than LVMH Mot Hennessy. It trades about 0.01 of its total potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.26 per unit of volatility. If you would invest  58,510  in LVMH Mot Hennessy on September 15, 2024 and sell it today you would earn a total of  5,250  from holding LVMH Mot Hennessy or generate 8.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ON SEMICONDUCTOR  vs.  LVMH Mot Hennessy

ON SEMICONDUCTOR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ON SEMICONDUCTOR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ON SEMICONDUCTOR is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

LVMH Mot Hennessy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LVMH Mot Hennessy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LVMH Mot is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ON SEMICONDUCTOR and LVMH Mot

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

The idea behind ON SEMICONDUCTOR and LVMH Mot Hennessy 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.