Correlation Between Cheniere Energy and KLA Tencor

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

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

Diversification Opportunities for Cheniere Energy and KLA Tencor

-0.59

Correlation Coefficient

Cheniere Energy  KLA Tencor

Excellent diversification

The 3 months correlation between Cheniere and KLA is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy Partners and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Cheniere Energy 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 Cheniere Energy Partners 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 Cheniere Energy i.e., Cheniere Energy and KLA Tencor go up and down completely randomly.

Pair Corralation between Cheniere Energy and KLA Tencor

Considering the 90-day investment horizon Cheniere Energy Partners is expected to generate 0.44 times more return on investment than KLA Tencor. However, Cheniere Energy Partners is 2.29 times less risky than KLA Tencor. It trades about 0.14 of its potential returns per unit of risk. KLA Tencor is currently generating about -0.05 per unit of risk. If you would invest  4,572  in Cheniere Energy Partners on September 15, 2024 and sell it today you would earn a total of  1,240  from holding Cheniere Energy Partners or generate 27.12% return on investment over 90 days.

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

Cheniere Energy Partners  vs.  KLA Tencor

Cheniere Energy Partners

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Cheniere Energy 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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Cheniere Energy and KLA Tencor

The main advantage of trading using opposite Cheniere Energy and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheniere Energy 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 Cheniere Energy Partners 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.