Correlation Between Aehr Test and KLA Tencor

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

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

Diversification Opportunities for Aehr Test and KLA Tencor

0.1

Correlation Coefficient

Aehr Test  KLA Tencor

Average diversification

The 3 months correlation between Aehr and KLA is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Aehr Test Systems and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Aehr Test 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 Aehr Test Systems 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 Aehr Test i.e., Aehr Test and KLA Tencor go up and down completely randomly.

Pair Corralation between Aehr Test and KLA Tencor

Given the investment horizon of 90 days Aehr Test Systems is expected to generate 4.27 times more return on investment than KLA Tencor. However, Aehr Test is 4.27 times more volatile than KLA Tencor. It trades about 0.36 of its potential returns per unit of risk. KLA Tencor is currently generating about 0.08 per unit of risk. If you would invest  1,118  in Aehr Test Systems on October 6, 2024 and sell it today you would earn a total of  609.00  from holding Aehr Test Systems or generate 54.47% return on investment over 90 days.

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

Aehr Test Systems  vs.  KLA Tencor

Aehr Test Systems

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aehr Test Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Aehr Test reported solid returns over the last few months and may actually be approaching a breakup point.

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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aehr Test and KLA Tencor

The main advantage of trading using opposite Aehr Test and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aehr Test 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 Aehr Test Systems 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.