Correlation Between ON Semiconductor and HUMANA

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

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

Diversification Opportunities for ON Semiconductor and HUMANA

0.11

Correlation Coefficient

ON Semiconductor  HUMANA

Average diversification

The 3 months correlation between ON Semiconductor and HUMANA is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC 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 HUMANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUMANA INC has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and HUMANA go up and down completely randomly.

Pair Corralation between ON Semiconductor and HUMANA

Allowing for the 90-day total investment horizon ON Semiconductor is expected to generate 2.88 times more return on investment than HUMANA. However, ON Semiconductor is 2.88 times more volatile than HUMANA INC. It trades about -0.01 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.19 per unit of risk. If you would invest  6,957  in ON Semiconductor on September 20, 2024 and sell it today you would lose (183.00) from holding ON Semiconductor or give up 2.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

ON Semiconductor  vs.  HUMANA INC

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

HUMANA INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUMANA INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HUMANA INC investors.

Pair Trading with ON Semiconductor and HUMANA

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

The idea behind ON Semiconductor and HUMANA INC 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.