Correlation Between Tandem Diabetes and KLA Tencor

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

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

Diversification Opportunities for Tandem Diabetes and KLA Tencor

0.87

Correlation Coefficient

Tandem Diabetes  KLA Tencor

Very poor diversification

The 3 months correlation between Tandem and KLA is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Tandem Diabetes 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 Tandem Diabetes Care are associated (or correlated) with KLA Tencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Tencor has no effect on the direction of Tandem Diabetes i.e., Tandem Diabetes and KLA Tencor go up and down completely randomly.

Pair Corralation between Tandem Diabetes and KLA Tencor

Given the investment horizon of 90 days Tandem Diabetes is expected to generate 4.59 times less return on investment than KLA Tencor. In addition to that, Tandem Diabetes is 1.69 times more volatile than KLA Tencor. It trades about 0.01 of its total potential returns per unit of risk. KLA Tencor is currently generating about 0.06 per unit of volatility. If you would invest  36,923  in KLA Tencor on September 20, 2024 and sell it today you would earn a total of  26,154  from holding KLA Tencor or generate 70.83% return on investment over 90 days.

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

Tandem Diabetes Care  vs.  KLA Tencor

Tandem Diabetes Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tandem Diabetes Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with Tandem Diabetes and KLA Tencor

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

The idea behind Tandem Diabetes Care and KLA Tencor 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.