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

0.36

Correlation Coefficient

Advanced Micro  ON Semiconductor

Weak diversification

The 3 months correlation between Advanced and ON Semiconductor is 0.36. 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 1.1 times more return on investment than ON Semiconductor. However, Advanced Micro is 1.1 times more volatile than ON Semiconductor. It trades about 0.02 of its potential returns per unit of risk. ON Semiconductor is currently generating about 0.01 per unit of risk. If you would invest  13,944  in Advanced Micro Devices on September 5, 2024 and sell it today you would earn a total of  254.00  from holding Advanced Micro Devices or generate 1.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Advanced Micro Devices  vs.  ON Semiconductor

Advanced Micro Devices

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Devices are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Advanced Micro is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 recent stock price disarray, may contribute to short-term losses for the investors.

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.

The idea behind Advanced Micro Devices and ON Semiconductor 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.