Correlation Between ON Semiconductor and Kulicke

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

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

Diversification Opportunities for ON Semiconductor and Kulicke

0.12

Correlation Coefficient

ON Semiconductor  Kulicke

Average diversification

The 3 months correlation between ON Semiconductor and Kulicke is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and Kulicke and Soffa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kulicke and Soffa 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 Kulicke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kulicke and Soffa has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and Kulicke go up and down completely randomly.

Pair Corralation between ON Semiconductor and Kulicke

Allowing for the 90-day total investment horizon ON Semiconductor is expected to generate 3.89 times less return on investment than Kulicke. But when comparing it to its historical volatility, ON Semiconductor is 1.03 times less risky than Kulicke. It trades about 0.04 of its potential returns per unit of risk. Kulicke and Soffa is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,013  in Kulicke and Soffa on September 4, 2024 and sell it today you would earn a total of  1,041  from holding Kulicke and Soffa or generate 25.94% return on investment over 90 days.

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

ON Semiconductor  vs.  Kulicke and Soffa

ON Semiconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ON Semiconductor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Kulicke and Soffa

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kulicke and Soffa are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward indicators, Kulicke exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ON Semiconductor and Kulicke

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

The idea behind ON Semiconductor and Kulicke and Soffa 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.