Correlation Between ON Semiconductor and Everspin Technologies

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

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

Diversification Opportunities for ON Semiconductor and Everspin Technologies

0.71

Correlation Coefficient

ON Semiconductor  Everspin Technologies

Poor diversification

The 3 months correlation between ON Semiconductor and Everspin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and Everspin Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everspin Technologies 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 Everspin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everspin Technologies has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and Everspin Technologies go up and down completely randomly.

Pair Corralation between ON Semiconductor and Everspin Technologies

Allowing for the 90-day total investment horizon ON Semiconductor is expected to under-perform the Everspin Technologies. In addition to that, ON Semiconductor is 1.88 times more volatile than Everspin Technologies. It trades about -0.2 of its total potential returns per unit of risk. Everspin Technologies is currently generating about -0.25 per unit of volatility. If you would invest  804.00  in Everspin Technologies on January 25, 2024 and sell it today you would lose (62.00) from holding Everspin Technologies or give up 7.71% of portfolio value over 90 days.

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

ON Semiconductor  vs.  Everspin Technologies

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 latest unfluctuating 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.

Everspin Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everspin Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ON Semiconductor and Everspin Technologies

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

The idea behind ON Semiconductor and Everspin Technologies 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.