Correlation Between Sunnova Energy and KLA Tencor

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

By analyzing existing cross correlation between Sunnova Energy International and KLA Tencor, you can compare the effects of market volatilities on Sunnova Energy and KLA Tencor 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 Sunnova Energy with a short position of KLA Tencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunnova Energy and KLA Tencor.

Diversification Opportunities for Sunnova Energy and KLA Tencor

0.17

Correlation Coefficient

Sunnova Energy  KLA Tencor

Average diversification

The 3 months correlation between Sunnova and KLA is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Sunnova Energy International and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Sunnova Energy 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 Sunnova Energy International are associated (or correlated) with KLA Tencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Tencor has no effect on the direction of Sunnova Energy i.e., Sunnova Energy and KLA Tencor go up and down completely randomly.

Pair Corralation between Sunnova Energy and KLA Tencor

Given the investment horizon of 90 days Sunnova Energy International is expected to under-perform the KLA Tencor. In addition to that, Sunnova Energy is 2.82 times more volatile than KLA Tencor. It trades about -0.02 of its total potential returns per unit of risk. KLA Tencor is currently generating about 0.07 per unit of volatility. If you would invest  40,129  in KLA Tencor on October 23, 2024 and sell it today you would earn a total of  35,618  from holding KLA Tencor or generate 88.76% return on investment over 90 days.

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

Sunnova Energy International  vs.  KLA Tencor

Sunnova Energy Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunnova Energy International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

KLA Tencor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Tencor are ranked lower than 9 (%) 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.

Pair Trading with Sunnova Energy and KLA Tencor

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

The idea behind Sunnova Energy International and KLA Tencor 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.