Correlation Between KLA Tencor and SoftBrands

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

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

Diversification Opportunities for KLA Tencor and SoftBrands

0.0

Correlation Coefficient

KLA Tencor  SoftBrands

Pay attention - limited upside

The 3 months correlation between KLA and SoftBrands is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and SoftBrands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftBrands 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 SoftBrands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftBrands has no effect on the direction of KLA Tencor i.e., KLA Tencor and SoftBrands go up and down completely randomly.

Pair Corralation between KLA Tencor and SoftBrands

If you would invest  65,237  in KLA Tencor on October 10, 2024 and sell it today you would earn a total of  3,693  from holding KLA Tencor or generate 5.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

KLA Tencor  vs.  SoftBrands

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 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.

SoftBrands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SoftBrands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, SoftBrands is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with KLA Tencor and SoftBrands

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

The idea behind KLA Tencor and SoftBrands 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.