Correlation Between SEKISUI CHEMICAL and ON SEMICONDUCTOR

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

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

Diversification Opportunities for SEKISUI CHEMICAL and ON SEMICONDUCTOR

0.03

Correlation Coefficient

SEKISUI CHEMICAL  ON SEMICONDUCTOR

Significant diversification

The 3 months correlation between SEKISUI and XS4 is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding SEKISUI CHEMICAL and ON SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON SEMICONDUCTOR and SEKISUI CHEMICAL 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 SEKISUI CHEMICAL 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 SEKISUI CHEMICAL i.e., SEKISUI CHEMICAL and ON SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between SEKISUI CHEMICAL and ON SEMICONDUCTOR

Assuming the 90 days trading horizon SEKISUI CHEMICAL is expected to generate 0.55 times more return on investment than ON SEMICONDUCTOR. However, SEKISUI CHEMICAL is 1.82 times less risky than ON SEMICONDUCTOR. It trades about 0.13 of its potential returns per unit of risk. ON SEMICONDUCTOR is currently generating about -0.02 per unit of risk. If you would invest  1,350  in SEKISUI CHEMICAL on September 3, 2024 and sell it today you would earn a total of  150.00  from holding SEKISUI CHEMICAL or generate 11.11% return on investment over 90 days.

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

SEKISUI CHEMICAL  vs.  ON SEMICONDUCTOR

SEKISUI CHEMICAL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SEKISUI CHEMICAL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, SEKISUI CHEMICAL 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 comparatively stable basic indicators, ON SEMICONDUCTOR is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SEKISUI CHEMICAL and ON SEMICONDUCTOR

The main advantage of trading using opposite SEKISUI CHEMICAL and ON SEMICONDUCTOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEKISUI CHEMICAL 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 SEKISUI CHEMICAL 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.