Correlation Between Globalfoundries and KLA Tencor

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

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

Diversification Opportunities for Globalfoundries and KLA Tencor

-0.44

Correlation Coefficient

Globalfoundries  KLA Tencor

Very good diversification

The 3 months correlation between Globalfoundries and KLA is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Globalfoundries 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 Globalfoundries 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 Globalfoundries i.e., Globalfoundries and KLA Tencor go up and down completely randomly.

Pair Corralation between Globalfoundries and KLA Tencor

Considering the 90-day investment horizon Globalfoundries is expected to generate 1.24 times more return on investment than KLA Tencor. However, Globalfoundries is 1.24 times more volatile than KLA Tencor. It trades about 0.07 of its potential returns per unit of risk. KLA Tencor is currently generating about -0.06 per unit of risk. If you would invest  3,919  in Globalfoundries on September 14, 2024 and sell it today you would earn a total of  479.00  from holding Globalfoundries or generate 12.22% return on investment over 90 days.

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

Globalfoundries  vs.  KLA Tencor

Globalfoundries

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled 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 Globalfoundries and KLA Tencor

The main advantage of trading using opposite Globalfoundries and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globalfoundries 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 Globalfoundries 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.