Correlation Between Boston Beer and KLA Tencor

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

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

Diversification Opportunities for Boston Beer and KLA Tencor

-0.76

Correlation Coefficient

Boston Beer  KLA Tencor

Pay attention - limited upside

The 3 months correlation between Boston and KLA is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Boston Beer 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 Boston Beer 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 Boston Beer i.e., Boston Beer and KLA Tencor go up and down completely randomly.

Pair Corralation between Boston Beer and KLA Tencor

Considering the 90-day investment horizon Boston Beer is expected to under-perform the KLA Tencor. But the stock apears to be less risky and, when comparing its historical volatility, Boston Beer is 1.1 times less risky than KLA Tencor. The stock trades about -0.14 of its potential returns per unit of risk. The KLA Tencor is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  66,823  in KLA Tencor on October 22, 2024 and sell it today you would earn a total of  8,924  from holding KLA Tencor or generate 13.35% return on investment over 90 days.

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

Boston Beer  vs.  KLA Tencor

Boston Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 Boston Beer and KLA Tencor

The main advantage of trading using opposite Boston Beer and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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 Boston Beer 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.