Correlation Between Diodes Incorporated and KLA Tencor

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

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

Diversification Opportunities for Diodes Incorporated and KLA Tencor

0.29

Correlation Coefficient

Diodes Incorporated  KLA Tencor

Modest diversification

The 3 months correlation between Diodes and KLA is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Diodes Incorporated and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Diodes Incorporated 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 Diodes Incorporated 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 Diodes Incorporated i.e., Diodes Incorporated and KLA Tencor go up and down completely randomly.

Pair Corralation between Diodes Incorporated and KLA Tencor

Given the investment horizon of 90 days Diodes Incorporated is expected to under-perform the KLA Tencor. In addition to that, Diodes Incorporated is 1.03 times more volatile than KLA Tencor. It trades about 0.0 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  36,876  in KLA Tencor on September 24, 2024 and sell it today you would earn a total of  26,061  from holding KLA Tencor or generate 70.67% return on investment over 90 days.

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

Diodes Incorporated  vs.  KLA Tencor

Diodes Incorporated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Diodes Incorporated is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 unsteady 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 Diodes Incorporated and KLA Tencor

The main advantage of trading using opposite Diodes Incorporated and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diodes Incorporated 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 Diodes Incorporated 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.