Correlation Between MKS Instruments and Keysight Technologies

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

By analyzing existing cross correlation between MKS Instruments and Keysight Technologies, you can compare the effects of market volatilities on MKS Instruments and Keysight Technologies 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 MKS Instruments with a short position of Keysight Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of MKS Instruments and Keysight Technologies.

Diversification Opportunities for MKS Instruments and Keysight Technologies

0.82

Correlation Coefficient

MKS Instruments  Keysight Technologies

Very poor diversification

The 3 months correlation between MKS and Keysight is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding MKS Instruments and Keysight Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keysight Technologies and MKS Instruments 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 MKS Instruments are associated (or correlated) with Keysight Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keysight Technologies has no effect on the direction of MKS Instruments i.e., MKS Instruments and Keysight Technologies go up and down completely randomly.

Pair Corralation between MKS Instruments and Keysight Technologies

Assuming the 90 days horizon MKS Instruments is expected to under-perform the Keysight Technologies. In addition to that, MKS Instruments is 1.47 times more volatile than Keysight Technologies. It trades about -0.03 of its total potential returns per unit of risk. Keysight Technologies is currently generating about 0.09 per unit of volatility. If you would invest  12,594  in Keysight Technologies on September 27, 2024 and sell it today you would earn a total of  2,978  from holding Keysight Technologies or generate 23.65% return on investment over 90 days.

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

MKS Instruments  vs.  Keysight Technologies

MKS Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MKS Instruments is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Keysight Technologies

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keysight Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Keysight Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MKS Instruments and Keysight Technologies

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

The idea behind MKS Instruments and Keysight Technologies 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 Global Correlations module to find global opportunities by holding instruments from different markets.