Correlation Between Hewlett Packard and ON Semiconductor

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

By analyzing existing cross correlation between Hewlett Packard Enterprise and ON Semiconductor, you can compare the effects of market volatilities on Hewlett Packard 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 Hewlett Packard with a short position of ON Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hewlett Packard and ON Semiconductor.

Diversification Opportunities for Hewlett Packard and ON Semiconductor

-0.35

Correlation Coefficient

Hewlett Packard  ON Semiconductor

Very good diversification

The 3 months correlation between Hewlett and ON Semiconductor is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor and Hewlett Packard 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 Hewlett Packard Enterprise 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 Hewlett Packard i.e., Hewlett Packard and ON Semiconductor go up and down completely randomly.

Pair Corralation between Hewlett Packard and ON Semiconductor

Considering the 90-day investment horizon Hewlett Packard Enterprise is expected to generate 1.1 times more return on investment than ON Semiconductor. However, Hewlett Packard is 1.1 times more volatile than ON Semiconductor. It trades about 0.08 of its potential returns per unit of risk. ON Semiconductor is currently generating about -0.04 per unit of risk. If you would invest  1,883  in Hewlett Packard Enterprise on September 21, 2024 and sell it today you would earn a total of  206.00  from holding Hewlett Packard Enterprise or generate 10.94% return on investment over 90 days.

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

Hewlett Packard Enterprise  vs.  ON Semiconductor

Hewlett Packard Ente

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Hewlett Packard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Hewlett Packard and ON Semiconductor

The main advantage of trading using opposite Hewlett Packard and ON Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard 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 Hewlett Packard Enterprise 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.