Correlation Between ON Semiconductor and FormFactor

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

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

Diversification Opportunities for ON Semiconductor and FormFactor

-0.12

Correlation Coefficient

ON Semiconductor  FormFactor

Good diversification

The 3 months correlation between ON Semiconductor and FormFactor is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor 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 FormFactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FormFactor has no effect on the direction of ON Semiconductor i.e., ON Semiconductor and FormFactor go up and down completely randomly.

Pair Corralation between ON Semiconductor and FormFactor

Allowing for the 90-day total investment horizon ON Semiconductor is expected to under-perform the FormFactor. In addition to that, ON Semiconductor is 1.12 times more volatile than FormFactor. It trades about -0.09 of its total potential returns per unit of risk. FormFactor is currently generating about 0.03 per unit of volatility. If you would invest  3,690  in FormFactor on January 24, 2024 and sell it today you would earn a total of  335.00  from holding FormFactor or generate 9.08% return on investment over 90 days.

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

ON Semiconductor  vs.  FormFactor

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 unfluctuating 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.

FormFactor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FormFactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, FormFactor is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ON Semiconductor and FormFactor

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

The idea behind ON Semiconductor and FormFactor 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.