Correlation Between KLA and Clover Health

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

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

Diversification Opportunities for KLA and Clover Health

0.7

Correlation Coefficient

KLA  Clover Health

Poor diversification

The 3 months correlation between KLA and Clover is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding KLA Corp. and Clover Health Investments, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clover Health Invest and KLA 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 KLA Corporation are associated (or correlated) with Clover Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clover Health Invest has no effect on the direction of KLA i.e., KLA and Clover Health go up and down completely randomly.

Pair Corralation between KLA and Clover Health

Assuming the 90 days trading horizon KLA is expected to generate 3.67 times less return on investment than Clover Health. But when comparing it to its historical volatility, KLA Corporation is 1.94 times less risky than Clover Health. It trades about 0.02 of its potential returns per unit of risk. Clover Health Investments, is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,004  in Clover Health Investments, on December 22, 2024 and sell it today you would earn a total of  86.00  from holding Clover Health Investments, or generate 4.29% return on investment over 90 days.

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

KLA Corp.  vs.  Clover Health Investments,

KLA Corporation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Clover Health Invest

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clover Health Investments, are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clover Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KLA and Clover Health

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

The idea behind KLA Corporation and Clover Health Investments, 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.