Correlation Between KLA Tencor and Keurig Dr

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

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

Diversification Opportunities for KLA Tencor and Keurig Dr

0.75

Correlation Coefficient

KLA Tencor  Keurig Dr

Poor diversification

The 3 months correlation between KLA and Keurig is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Keurig Dr Pepper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keurig Dr Pepper 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 Keurig Dr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keurig Dr Pepper has no effect on the direction of KLA Tencor i.e., KLA Tencor and Keurig Dr go up and down completely randomly.

Pair Corralation between KLA Tencor and Keurig Dr

Given the investment horizon of 90 days KLA Tencor is expected to generate 1.58 times more return on investment than Keurig Dr. However, KLA Tencor is 1.58 times more volatile than Keurig Dr Pepper. It trades about 0.08 of its potential returns per unit of risk. Keurig Dr Pepper is currently generating about -0.18 per unit of risk. 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

KLA Tencor  vs.  Keurig Dr Pepper

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.

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.

Pair Trading with KLA Tencor and Keurig Dr

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

The idea behind KLA Tencor and Keurig Dr Pepper 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.