Correlation Between KLA and ASM Pacific

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

By analyzing existing cross correlation between KLA Corporation and ASM Pacific Technology, you can compare the effects of market volatilities on KLA and ASM Pacific 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 ASM Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA and ASM Pacific.

Diversification Opportunities for KLA and ASM Pacific

0.22

Correlation Coefficient

KLA  ASM Pacific

Modest diversification

The 3 months correlation between KLA and ASM is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding KLA Corp. and ASM Pacific Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASM Pacific Technology 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 ASM Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASM Pacific Technology has no effect on the direction of KLA i.e., KLA and ASM Pacific go up and down completely randomly.

Pair Corralation between KLA and ASM Pacific

Assuming the 90 days horizon KLA Corporation is expected to generate 0.59 times more return on investment than ASM Pacific. However, KLA Corporation is 1.7 times less risky than ASM Pacific. It trades about 0.07 of its potential returns per unit of risk. ASM Pacific Technology is currently generating about -0.09 per unit of risk. If you would invest  59,615  in KLA Corporation on December 19, 2024 and sell it today you would earn a total of  5,335  from holding KLA Corporation or generate 8.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

KLA Corp.  vs.  ASM Pacific Technology

KLA Corporation

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, KLA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ASM Pacific Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASM Pacific Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KLA and ASM Pacific

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

The idea behind KLA Corporation and ASM Pacific Technology 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 Transaction History module to view history of all your transactions and understand their impact on performance.