Correlation Between Keurig Dr and KLA Tencor

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

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

Diversification Opportunities for Keurig Dr and KLA Tencor

0.75

Correlation Coefficient

Keurig Dr  KLA Tencor

Poor diversification

The 3 months correlation between Keurig and KLA is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Keurig Dr 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 Keurig Dr Pepper 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 Keurig Dr i.e., Keurig Dr and KLA Tencor go up and down completely randomly.

Pair Corralation between Keurig Dr and KLA Tencor

Considering the 90-day investment horizon Keurig Dr Pepper is expected to under-perform the KLA Tencor. But the stock apears to be less risky and, when comparing its historical volatility, Keurig Dr Pepper is 1.58 times less risky than KLA Tencor. The stock trades about -0.18 of its potential returns per unit of risk. The KLA Tencor is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  64,261  in KLA Tencor on October 6, 2024 and sell it today you would earn a total of  1,440  from holding KLA Tencor or generate 2.24% return on investment over 90 days.

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

Keurig Dr Pepper  vs.  KLA Tencor

Keurig Dr Pepper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keurig Dr Pepper has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 Keurig Dr and KLA Tencor

The main advantage of trading using opposite Keurig Dr and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keurig Dr 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 Keurig Dr Pepper 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.