Correlation Between Raytech Holding and KLA Tencor

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

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

Diversification Opportunities for Raytech Holding and KLA Tencor

0.55

Correlation Coefficient

Raytech Holding  KLA Tencor

Very weak diversification

The 3 months correlation between Raytech and KLA is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Raytech Holding Limited and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Raytech Holding 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 Raytech Holding Limited 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 Raytech Holding i.e., Raytech Holding and KLA Tencor go up and down completely randomly.

Pair Corralation between Raytech Holding and KLA Tencor

Considering the 90-day investment horizon Raytech Holding Limited is expected to under-perform the KLA Tencor. In addition to that, Raytech Holding is 1.73 times more volatile than KLA Tencor. It trades about -0.05 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  74,942  in KLA Tencor on September 13, 2024 and sell it today you would lose (10,058) from holding KLA Tencor or give up 13.42% of portfolio value over 90 days.

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

Raytech Holding Limited  vs.  KLA Tencor

Raytech Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytech Holding Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KLA Tencor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLA Tencor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Raytech Holding and KLA Tencor

The main advantage of trading using opposite Raytech Holding and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytech Holding 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 Raytech Holding Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.