Correlation Between KLA Tencor and Beauty Health
Can any of the company-specific risk be diversified away by investing in both KLA Tencor and Beauty Health 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 Beauty Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and Beauty Health Co, you can compare the effects of market volatilities on KLA Tencor and Beauty Health 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 Beauty Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Beauty Health.
Diversification Opportunities for KLA Tencor and Beauty Health
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KLA and Beauty is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Beauty Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Health 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 Beauty Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Health has no effect on the direction of KLA Tencor i.e., KLA Tencor and Beauty Health go up and down completely randomly.
Pair Corralation between KLA Tencor and Beauty Health
Given the investment horizon of 90 days KLA Tencor is expected to generate 0.49 times more return on investment than Beauty Health. However, KLA Tencor is 2.03 times less risky than Beauty Health. It trades about -0.18 of its potential returns per unit of risk. Beauty Health Co is currently generating about -0.32 per unit of risk. If you would invest 73,854 in KLA Tencor on December 4, 2024 and sell it today you would lose (5,452) from holding KLA Tencor or give up 7.38% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.24% |
Values | Daily Returns |
KLA Tencor vs. Beauty Health Co
Performance |
Timeline |
KLA Tencor |
Beauty Health |
KLA Tencor and Beauty Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KLA Tencor and Beauty Health
The main advantage of trading using opposite KLA Tencor and Beauty Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, Beauty Health 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 Beauty Health will offset losses from the drop in Beauty Health's long position.KLA Tencor vs. Applied Materials | KLA Tencor vs. ASML Holding NV | KLA Tencor vs. Axcelis Technologies | KLA Tencor vs. Teradyne |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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