Correlation Between Kulicke and Arm Holdings

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

By analyzing existing cross correlation between Kulicke and Soffa and Arm Holdings plc, you can compare the effects of market volatilities on Kulicke and Arm Holdings 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 Kulicke with a short position of Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kulicke and Arm Holdings.

Diversification Opportunities for Kulicke and Arm Holdings

-0.26

Correlation Coefficient

Kulicke  Arm Holdings

Very good diversification

The 3 months correlation between Kulicke and Arm is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Kulicke and Soffa and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc and Kulicke 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 Kulicke and Soffa are associated (or correlated) with Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Kulicke i.e., Kulicke and Arm Holdings go up and down completely randomly.

Pair Corralation between Kulicke and Arm Holdings

Given the investment horizon of 90 days Kulicke and Soffa is expected to generate 0.65 times more return on investment than Arm Holdings. However, Kulicke and Soffa is 1.54 times less risky than Arm Holdings. It trades about 0.01 of its potential returns per unit of risk. Arm Holdings plc is currently generating about -0.03 per unit of risk. If you would invest  4,889  in Kulicke and Soffa on September 30, 2024 and sell it today you would lose (113.00) from holding Kulicke and Soffa or give up 2.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Kulicke and Soffa  vs.  Arm Holdings plc

Kulicke and Soffa

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kulicke and Soffa are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Kulicke may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Arm Holdings plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arm Holdings plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Kulicke and Arm Holdings

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

The idea behind Kulicke and Soffa and Arm Holdings plc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.