Correlation Between KLA Tencor and Boot Barn

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

By analyzing existing cross correlation between KLA Tencor and Boot Barn Holdings, you can compare the effects of market volatilities on KLA Tencor and Boot Barn 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 KLA Tencor with a short position of Boot Barn. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Boot Barn.

Diversification Opportunities for KLA Tencor and Boot Barn

0.6

Correlation Coefficient

KLA Tencor  Boot Barn

Poor diversification

The 3 months correlation between KLA and Boot is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Boot Barn Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boot Barn Holdings and KLA Tencor 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 KLA Tencor are associated (or correlated) with Boot Barn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boot Barn Holdings has no effect on the direction of KLA Tencor i.e., KLA Tencor and Boot Barn go up and down completely randomly.

Pair Corralation between KLA Tencor and Boot Barn

Given the investment horizon of 90 days KLA Tencor is expected to under-perform the Boot Barn. But the stock apears to be less risky and, when comparing its historical volatility, KLA Tencor is 1.28 times less risky than Boot Barn. The stock trades about -0.1 of its potential returns per unit of risk. The Boot Barn Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  16,728  in Boot Barn Holdings on September 30, 2024 and sell it today you would lose (1,061) from holding Boot Barn Holdings or give up 6.34% of portfolio value over 90 days.

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

KLA Tencor  vs.  Boot Barn Holdings

KLA Tencor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLA Tencor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boot Barn Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Boot Barn is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KLA Tencor and Boot Barn

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

The idea behind KLA Tencor and Boot Barn Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.