Correlation Between KLA Tencor and 191216DD9

Can any of the company-specific risk be diversified away by investing in both KLA Tencor and 191216DD9 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 191216DD9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KLA Tencor and COCA COLA CO, you can compare the effects of market volatilities on KLA Tencor and 191216DD9 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 191216DD9. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and 191216DD9.

Diversification Opportunities for KLA Tencor and 191216DD9

0.43

Correlation Coefficient

KLA Tencor  191216DD9

Very weak diversification

The 3 months correlation between KLA and 191216DD9 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO 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 191216DD9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of KLA Tencor i.e., KLA Tencor and 191216DD9 go up and down completely randomly.

Pair Corralation between KLA Tencor and 191216DD9

Given the investment horizon of 90 days KLA Tencor is expected to generate 3.84 times more return on investment than 191216DD9. However, KLA Tencor is 3.84 times more volatile than COCA COLA CO. It trades about 0.09 of its potential returns per unit of risk. COCA COLA CO is currently generating about 0.17 per unit of risk. If you would invest  63,147  in KLA Tencor on September 27, 2024 and sell it today you would earn a total of  1,906  from holding KLA Tencor or generate 3.02% return on investment over 90 days.

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

KLA Tencor  vs.  COCA COLA CO

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 weak 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.

COCA A CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COCA COLA CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 191216DD9 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KLA Tencor and 191216DD9

The main advantage of trading using opposite KLA Tencor and 191216DD9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, 191216DD9 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 191216DD9 will offset losses from the drop in 191216DD9's long position.

The idea behind KLA Tencor and COCA COLA CO 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.