Correlation Between ON Semiconductor and Vishay Intertechnology

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Can any of the company-specific risk be diversified away by investing in both ON Semiconductor and Vishay Intertechnology 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 Vishay Intertechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ON Semiconductor and Vishay Intertechnology, you can compare the effects of market volatilities on ON Semiconductor and Vishay Intertechnology 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 Vishay Intertechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of ON Semiconductor and Vishay Intertechnology.

Diversification Opportunities for ON Semiconductor and Vishay Intertechnology

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between ON Semiconductor and Vishay is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and Vishay Intertechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Intertechnology 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 Vishay Intertechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vishay Intertechnology has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and Vishay Intertechnology go up and down completely randomly.

Pair Corralation between ON Semiconductor and Vishay Intertechnology

Allowing for the 90-day total investment horizon ON Semiconductor is expected to under-perform the Vishay Intertechnology. In addition to that, ON Semiconductor is 1.62 times more volatile than Vishay Intertechnology. It trades about -0.06 of its total potential returns per unit of risk. Vishay Intertechnology is currently generating about 0.12 per unit of volatility. If you would invest  2,167  in Vishay Intertechnology on December 29, 2023 and sell it today you would earn a total of  101.00  from holding Vishay Intertechnology or generate 4.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ON Semiconductor  vs.  Vishay Intertechnology

 Performance 
       Timeline  
ON Semiconductor 

Risk-Adjusted Performance

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Over the last 90 days ON Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Vishay Intertechnology 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Vishay Intertechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vishay Intertechnology is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

ON Semiconductor and Vishay Intertechnology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ON Semiconductor and Vishay Intertechnology

The main advantage of trading using opposite ON Semiconductor and Vishay Intertechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON Semiconductor position performs unexpectedly, Vishay Intertechnology 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 Vishay Intertechnology will offset losses from the drop in Vishay Intertechnology's long position.
The idea behind ON Semiconductor and Vishay Intertechnology 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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