Correlation Between KLA Tencor and Freeport

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

By analyzing existing cross correlation between KLA Tencor and Freeport McMoRan 5 percent, you can compare the effects of market volatilities on KLA Tencor and Freeport 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 Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Freeport.

Diversification Opportunities for KLA Tencor and Freeport

0.33

Correlation Coefficient

KLA Tencor  Freeport

Weak diversification

The 3 months correlation between KLA and Freeport is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Freeport McMoRan 5 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 5 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 Freeport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan 5 has no effect on the direction of KLA Tencor i.e., KLA Tencor and Freeport go up and down completely randomly.

Pair Corralation between KLA Tencor and Freeport

Given the investment horizon of 90 days KLA Tencor is expected to generate 2.15 times more return on investment than Freeport. However, KLA Tencor is 2.15 times more volatile than Freeport McMoRan 5 percent. It trades about 0.03 of its potential returns per unit of risk. Freeport McMoRan 5 percent is currently generating about -0.06 per unit of risk. If you would invest  64,467  in KLA Tencor on September 26, 2024 and sell it today you would earn a total of  586.00  from holding KLA Tencor or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

KLA Tencor  vs.  Freeport McMoRan 5 percent

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Freeport McMoRan 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 5 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KLA Tencor and Freeport

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

The idea behind KLA Tencor and Freeport McMoRan 5 percent 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.