Correlation Between KLA Tencor and Sumco Corp

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Can any of the company-specific risk be diversified away by investing in both KLA Tencor and Sumco Corp 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 Sumco Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and Sumco Corp ADR, you can compare the effects of market volatilities on KLA Tencor and Sumco Corp 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 Sumco Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Sumco Corp.

Diversification Opportunities for KLA Tencor and Sumco Corp

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between KLA and Sumco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Sumco Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumco Corp ADR 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 Sumco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumco Corp ADR has no effect on the direction of KLA Tencor i.e., KLA Tencor and Sumco Corp go up and down completely randomly.

Pair Corralation between KLA Tencor and Sumco Corp

Given the investment horizon of 90 days KLA Tencor is expected to generate 0.93 times more return on investment than Sumco Corp. However, KLA Tencor is 1.07 times less risky than Sumco Corp. It trades about -0.04 of its potential returns per unit of risk. Sumco Corp ADR is currently generating about -0.15 per unit of risk. If you would invest  79,034  in KLA Tencor on September 22, 2024 and sell it today you would lose (16,097) from holding KLA Tencor or give up 20.37% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

KLA Tencor  vs.  Sumco Corp ADR

 Performance 
       Timeline  
KLA Tencor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Sumco Corp ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sumco Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KLA Tencor and Sumco Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KLA Tencor and Sumco Corp

The main advantage of trading using opposite KLA Tencor and Sumco Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, Sumco Corp 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 Sumco Corp will offset losses from the drop in Sumco Corp's long position.
The idea behind KLA Tencor and Sumco Corp ADR 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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