Correlation Between KLA Tencor and Lasertec

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

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

Diversification Opportunities for KLA Tencor and Lasertec

0.42

Correlation Coefficient

KLA Tencor  Lasertec

Very weak diversification

The 3 months correlation between KLA and Lasertec is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Lasertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lasertec 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 Lasertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lasertec has no effect on the direction of KLA Tencor i.e., KLA Tencor and Lasertec go up and down completely randomly.

Pair Corralation between KLA Tencor and Lasertec

Given the investment horizon of 90 days KLA Tencor is expected to generate 1.85 times more return on investment than Lasertec. However, KLA Tencor is 1.85 times more volatile than Lasertec. It trades about 0.08 of its potential returns per unit of risk. Lasertec is currently generating about -0.11 per unit of risk. If you would invest  64,653  in KLA Tencor on December 22, 2024 and sell it today you would earn a total of  5,996  from holding KLA Tencor or generate 9.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

KLA Tencor  vs.  Lasertec

KLA Tencor

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Tencor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, KLA Tencor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lasertec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lasertec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with KLA Tencor and Lasertec

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

The idea behind KLA Tencor and Lasertec 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.