Correlation Between KLA Tencor and Sunnova Energy

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

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

Diversification Opportunities for KLA Tencor and Sunnova Energy

0.75

Correlation Coefficient

KLA Tencor  Sunnova Energy

Poor diversification

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

Pair Corralation between KLA Tencor and Sunnova Energy

Given the investment horizon of 90 days KLA Tencor is expected to generate 0.25 times more return on investment than Sunnova Energy. However, KLA Tencor is 4.06 times less risky than Sunnova Energy. It trades about 0.03 of its potential returns per unit of risk. Sunnova Energy International is currently generating about -0.01 per unit of risk. If you would invest  65,237  in KLA Tencor on October 8, 2024 and sell it today you would earn a total of  464.00  from holding KLA Tencor or generate 0.71% 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.  Sunnova Energy International

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 uncertain 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.

Sunnova Energy Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunnova Energy International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with KLA Tencor and Sunnova Energy

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

The idea behind KLA Tencor and Sunnova Energy International 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.