Correlation Between LEO Token and ON Semiconductor

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

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

Diversification Opportunities for LEO Token and ON Semiconductor

0.04

Correlation Coefficient

LEO Token  ON Semiconductor

Significant diversification

The 3 months correlation between LEO and ON Semiconductor is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding LEO Token and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor and LEO Token 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 LEO Token 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 LEO Token i.e., LEO Token and ON Semiconductor go up and down completely randomly.

Pair Corralation between LEO Token and ON Semiconductor

Assuming the 90 days trading horizon LEO Token is expected to generate 3.2 times less return on investment than ON Semiconductor. But when comparing it to its historical volatility, LEO Token is 3.63 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 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,967  in ON Semiconductor on March 5, 2024 and sell it today you would earn a total of  337.00  from holding ON Semiconductor or generate 4.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

LEO Token  vs.  ON Semiconductor

LEO Token

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LEO Token are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, LEO Token may actually be approaching a critical reversion point that can send shares even higher in July 2024.

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.

Pair Trading with LEO Token and ON Semiconductor

The main advantage of trading using opposite LEO Token and ON Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEO Token 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 LEO Token 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.