Correlation Between KLA Tencor and Diodes Incorporated

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

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

Diversification Opportunities for KLA Tencor and Diodes Incorporated

0.29

Correlation Coefficient

KLA Tencor  Diodes Incorporated

Modest diversification

The 3 months correlation between KLA and Diodes is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated 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 Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of KLA Tencor i.e., KLA Tencor and Diodes Incorporated go up and down completely randomly.

Pair Corralation between KLA Tencor and Diodes Incorporated

Given the investment horizon of 90 days KLA Tencor is expected to generate 0.97 times more return on investment than Diodes Incorporated. However, KLA Tencor is 1.03 times less risky than Diodes Incorporated. It trades about 0.06 of its potential returns per unit of risk. Diodes Incorporated is currently generating about 0.0 per unit of risk. If you would invest  36,876  in KLA Tencor on September 24, 2024 and sell it today you would earn a total of  26,061  from holding KLA Tencor or generate 70.67% return on investment over 90 days.

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

KLA Tencor  vs.  Diodes Incorporated

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 unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Diodes Incorporated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Diodes Incorporated is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KLA Tencor and Diodes Incorporated

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

The idea behind KLA Tencor and Diodes Incorporated 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.