Correlation Between Applied Materials, and KLA

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

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

Diversification Opportunities for Applied Materials, and KLA

0.58

Correlation Coefficient

Applied Materials,  KLA

Very weak diversification

The 3 months correlation between Applied and KLA is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and KLA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Corporation and Applied Materials, 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 Applied Materials, are associated (or correlated) with KLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Corporation has no effect on the direction of Applied Materials, i.e., Applied Materials, and KLA go up and down completely randomly.

Pair Corralation between Applied Materials, and KLA

Assuming the 90 days trading horizon Applied Materials, is expected to generate 16.28 times less return on investment than KLA. In addition to that, Applied Materials, is 1.32 times more volatile than KLA Corporation. It trades about 0.0 of its total potential returns per unit of risk. KLA Corporation is currently generating about 0.1 per unit of volatility. If you would invest  98,675  in KLA Corporation on October 8, 2024 and sell it today you would earn a total of  2,603  from holding KLA Corporation or generate 2.64% return on investment over 90 days.

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

Applied Materials,  vs.  KLA Corp.

Applied Materials,

Risk-Adjusted Performance

0 of 100

Very Weak

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

KLA Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Applied Materials, and KLA

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

The idea behind Applied Materials, and KLA Corporation 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.