Correlation Between KLA Tencor and BCULC

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

By analyzing existing cross correlation between KLA Tencor and BCULC 35 15 FEB 29, you can compare the effects of market volatilities on KLA Tencor and BCULC 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 BCULC. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and BCULC.

Diversification Opportunities for KLA Tencor and BCULC

-0.46

Correlation Coefficient

KLA Tencor  BCULC

Very good diversification

The 3 months correlation between KLA and BCULC is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and BCULC 35 15 FEB 29 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCULC 35 15 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 BCULC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCULC 35 15 has no effect on the direction of KLA Tencor i.e., KLA Tencor and BCULC go up and down completely randomly.

Pair Corralation between KLA Tencor and BCULC

Given the investment horizon of 90 days KLA Tencor is expected to generate 4.0 times more return on investment than BCULC. However, KLA Tencor is 4.0 times more volatile than BCULC 35 15 FEB 29. It trades about 0.25 of its potential returns per unit of risk. BCULC 35 15 FEB 29 is currently generating about -0.16 per unit of risk. If you would invest  65,488  in KLA Tencor on October 18, 2024 and sell it today you would earn a total of  6,137  from holding KLA Tencor or generate 9.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	42.11%
Values	Daily Returns

KLA Tencor  vs.  BCULC 35 15 FEB 29

KLA Tencor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Tencor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, KLA Tencor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BCULC 35 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCULC 35 15 FEB 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BCULC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KLA Tencor and BCULC

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

The idea behind KLA Tencor and BCULC 35 15 FEB 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.