Correlation Between ON Semiconductor and NetEase

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

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

Diversification Opportunities for ON Semiconductor and NetEase

0.49

Correlation Coefficient

ON Semiconductor  NetEase

Very weak diversification

The 3 months correlation between O2NS34 and NetEase is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and NetEase go up and down completely randomly.

Pair Corralation between ON Semiconductor and NetEase

Assuming the 90 days trading horizon ON Semiconductor is expected to generate 1.69 times more return on investment than NetEase. However, ON Semiconductor is 1.69 times more volatile than NetEase. It trades about 0.19 of its potential returns per unit of risk. NetEase is currently generating about 0.17 per unit of risk. If you would invest  2,644  in ON Semiconductor on April 23, 2025 and sell it today you would earn a total of  1,568  from holding ON Semiconductor or generate 59.3% return on investment over 90 days.

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

ON Semiconductor  vs.  NetEase

ON Semiconductor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ON Semiconductor are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ON Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

NetEase

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NetEase sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ON Semiconductor and NetEase

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

The idea behind ON Semiconductor and NetEase 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.