Correlation Between KLA Tencor and Arm Holdings
Can any of the company-specific risk be diversified away by investing in both KLA Tencor and Arm Holdings 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 Tencor and Arm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and Arm Holdings plc, you can compare the effects of market volatilities on KLA Tencor and Arm Holdings 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 Tencor with a short position of Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Arm Holdings.
Diversification Opportunities for KLA Tencor and Arm Holdings
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KLA and Arm is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc and KLA Tencor 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 Tencor are associated (or correlated) with Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of KLA Tencor i.e., KLA Tencor and Arm Holdings go up and down completely randomly.
Pair Corralation between KLA Tencor and Arm Holdings
Given the investment horizon of 90 days KLA Tencor is expected to generate 0.47 times more return on investment than Arm Holdings. However, KLA Tencor is 2.12 times less risky than Arm Holdings. It trades about 0.13 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.04 per unit of risk. If you would invest 63,519 in KLA Tencor on December 3, 2024 and sell it today you would earn a total of 7,365 from holding KLA Tencor or generate 11.59% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
KLA Tencor vs. Arm Holdings plc
Performance |
Timeline |
KLA Tencor |
Arm Holdings plc |
KLA Tencor and Arm Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KLA Tencor and Arm Holdings
The main advantage of trading using opposite KLA Tencor and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, Arm Holdings 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 Arm Holdings will offset losses from the drop in Arm Holdings' long position.KLA Tencor vs. Applied Materials | KLA Tencor vs. ASML Holding NV | KLA Tencor vs. Axcelis Technologies | KLA Tencor vs. Teradyne |
Arm Holdings vs. Sun Country Airlines | Arm Holdings vs. Nexstar Broadcasting Group | Arm Holdings vs. Afya | Arm Holdings vs. Verra Mobility Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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