Correlation Between KLA Tencor and 68389XCH6

Can any of the company-specific risk be diversified away by investing in both KLA Tencor and 68389XCH6 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 68389XCH6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KLA Tencor and ORCL 615 09 NOV 29, you can compare the effects of market volatilities on KLA Tencor and 68389XCH6 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 68389XCH6. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and 68389XCH6.

Diversification Opportunities for KLA Tencor and 68389XCH6

0.26

Correlation Coefficient

KLA Tencor  68389XCH6

Modest diversification

The 3 months correlation between KLA and 68389XCH6 is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and ORCL 615 09 NOV 29 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORCL 615 09 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 68389XCH6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORCL 615 09 has no effect on the direction of KLA Tencor i.e., KLA Tencor and 68389XCH6 go up and down completely randomly.

Pair Corralation between KLA Tencor and 68389XCH6

Given the investment horizon of 90 days KLA Tencor is expected to generate 6.49 times more return on investment than 68389XCH6. However, KLA Tencor is 6.49 times more volatile than ORCL 615 09 NOV 29. It trades about 0.09 of its potential returns per unit of risk. ORCL 615 09 NOV 29 is currently generating about 0.0 per unit of risk. If you would invest  64,709  in KLA Tencor on December 25, 2024 and sell it today you would earn a total of  7,331  from holding KLA Tencor or generate 11.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

KLA Tencor  vs.  ORCL 615 09 NOV 29

KLA Tencor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Tencor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, KLA Tencor exhibited solid returns over the last few months and may actually be approaching a breakup point.

ORCL 615 09

Risk-Adjusted Performance

Very Weak

Over the last 90 days ORCL 615 09 NOV 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 68389XCH6 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KLA Tencor and 68389XCH6

The main advantage of trading using opposite KLA Tencor and 68389XCH6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, 68389XCH6 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 68389XCH6 will offset losses from the drop in 68389XCH6's long position.

The idea behind KLA Tencor and ORCL 615 09 NOV 29 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.