Correlation Between KLA Tencor and NiSource

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Can any of the company-specific risk be diversified away by investing in both KLA Tencor and NiSource 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 NiSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and NiSource, you can compare the effects of market volatilities on KLA Tencor and NiSource 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 NiSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and NiSource.

Diversification Opportunities for KLA Tencor and NiSource

KLANiSourceDiversified AwayKLANiSourceDiversified Away100%
-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between KLA and NiSource is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource 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 NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of KLA Tencor i.e., KLA Tencor and NiSource go up and down completely randomly.

Pair Corralation between KLA Tencor and NiSource

Given the investment horizon of 90 days KLA Tencor is expected to generate 2.18 times more return on investment than NiSource. However, KLA Tencor is 2.18 times more volatile than NiSource. It trades about 0.05 of its potential returns per unit of risk. NiSource is currently generating about 0.09 per unit of risk. If you would invest  64,322  in KLA Tencor on September 15, 2024 and sell it today you would earn a total of  1,054  from holding KLA Tencor or generate 1.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

KLA Tencor  vs.  NiSource

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -15-10-5051015
JavaScript chart by amCharts 3.21.15KLAC NI
       Timeline  
KLA Tencor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec650700750800
NiSource 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, NiSource may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec3435363738

KLA Tencor and NiSource Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.39-3.29-2.19-1.080.01.032.083.134.19 0.10.20.30.4
JavaScript chart by amCharts 3.21.15KLAC NI
       Returns  

Pair Trading with KLA Tencor and NiSource

The main advantage of trading using opposite KLA Tencor and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, NiSource 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 NiSource will offset losses from the drop in NiSource's long position.
The idea behind KLA Tencor and NiSource 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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