Correlation Between Rohm Co and ON Semiconductor

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

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

Diversification Opportunities for Rohm Co and ON Semiconductor

0.49

Correlation Coefficient

Rohm Co  ON Semiconductor

Very weak diversification

The 3 months correlation between Rohm and ON Semiconductor is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Rohm Co Ltd and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor and Rohm Co 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 Rohm Co Ltd 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 Rohm Co i.e., Rohm Co and ON Semiconductor go up and down completely randomly.

Pair Corralation between Rohm Co and ON Semiconductor

Assuming the 90 days horizon Rohm Co Ltd is expected to under-perform the ON Semiconductor. In addition to that, Rohm Co is 1.02 times more volatile than ON Semiconductor. It trades about -0.17 of its total potential returns per unit of risk. ON Semiconductor is currently generating about 0.01 per unit of volatility. If you would invest  7,076  in ON Semiconductor on September 3, 2024 and sell it today you would earn a total of  36.00  from holding ON Semiconductor or generate 0.51% return on investment over 90 days.

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

Rohm Co Ltd  vs.  ON Semiconductor

Rohm Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rohm Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 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 Rohm Co and ON Semiconductor

The main advantage of trading using opposite Rohm Co and ON Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rohm Co 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 Rohm Co Ltd 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.