Correlation Between Telecom and KLA Tencor

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

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

Diversification Opportunities for Telecom and KLA Tencor

0.33

Correlation Coefficient

Telecom  KLA Tencor

Weak diversification

The 3 months correlation between Telecom and KLA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia Capital and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Telecom 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 Telecom Italia Capital 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 Telecom i.e., Telecom and KLA Tencor go up and down completely randomly.

Pair Corralation between Telecom and KLA Tencor

Assuming the 90 days trading horizon Telecom Italia Capital is expected to generate 0.64 times more return on investment than KLA Tencor. However, Telecom Italia Capital is 1.57 times less risky than KLA Tencor. It trades about -0.13 of its potential returns per unit of risk. KLA Tencor is currently generating about -0.1 per unit of risk. If you would invest  10,385  in Telecom Italia Capital on September 20, 2024 and sell it today you would lose (1,435) from holding Telecom Italia Capital or give up 13.82% of portfolio value over 90 days.

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

Telecom Italia Capital  vs.  KLA Tencor

Telecom Italia Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telecom Italia Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat 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 Telecom Italia Capital 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 Telecom and KLA Tencor

The main advantage of trading using opposite Telecom and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom 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 Telecom Italia Capital 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.