Correlation Between Network CN and KLA Tencor

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

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

Diversification Opportunities for Network CN and KLA Tencor

-0.27

Correlation Coefficient

Network CN  KLA Tencor

Very good diversification

The 3 months correlation between Network and KLA is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Network CN and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Network CN 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 Network CN 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 Network CN i.e., Network CN and KLA Tencor go up and down completely randomly.

Pair Corralation between Network CN and KLA Tencor

Given the investment horizon of 90 days Network CN is expected to generate 57.11 times more return on investment than KLA Tencor. However, Network CN is 57.11 times more volatile than KLA Tencor. It trades about 0.21 of its potential returns per unit of risk. KLA Tencor is currently generating about 0.07 per unit of risk. If you would invest  100.00  in Network CN on December 4, 2024 and sell it today you would lose (82.00) from holding Network CN or give up 82.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	26.17%
Values	Daily Returns

Network CN  vs.  KLA Tencor

Network CN

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Network CN are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Network CN displayed solid returns over the last few months and may actually be approaching a breakup point.

KLA Tencor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Tencor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, KLA Tencor is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Network CN and KLA Tencor

The main advantage of trading using opposite Network CN and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Network CN 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 Network CN 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.