Correlation Between KLA Tencor and Globalfoundries

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

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

Diversification Opportunities for KLA Tencor and Globalfoundries

-0.42

Correlation Coefficient

KLA Tencor  Globalfoundries

Very good diversification

The 3 months correlation between KLA and Globalfoundries is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of KLA Tencor i.e., KLA Tencor and Globalfoundries go up and down completely randomly.

Pair Corralation between KLA Tencor and Globalfoundries

Given the investment horizon of 90 days KLA Tencor is expected to under-perform the Globalfoundries. But the stock apears to be less risky and, when comparing its historical volatility, KLA Tencor is 1.29 times less risky than Globalfoundries. The stock trades about -0.1 of its potential returns per unit of risk. The Globalfoundries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,025  in Globalfoundries on September 30, 2024 and sell it today you would earn a total of  393.00  from holding Globalfoundries or generate 9.76% return on investment over 90 days.

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

KLA Tencor  vs.  Globalfoundries

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.

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KLA Tencor and Globalfoundries

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

The idea behind KLA Tencor and Globalfoundries 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.