Correlation Between Sealed Air and KLA Tencor

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

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

Diversification Opportunities for Sealed Air and KLA Tencor

-0.37

Correlation Coefficient

Sealed Air  KLA Tencor

Very good diversification

The 3 months correlation between Sealed and KLA is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Sealed Air 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 Sealed Air 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 Sealed Air i.e., Sealed Air and KLA Tencor go up and down completely randomly.

Pair Corralation between Sealed Air and KLA Tencor

Considering the 90-day investment horizon Sealed Air is expected to generate 3.82 times less return on investment than KLA Tencor. But when comparing it to its historical volatility, Sealed Air is 1.4 times less risky than KLA Tencor. It trades about 0.05 of its potential returns per unit of risk. KLA Tencor is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  63,519  in KLA Tencor on December 3, 2024 and sell it today you would earn a total of  7,365  from holding KLA Tencor or generate 11.59% return on investment over 90 days.

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

Sealed Air  vs.  KLA Tencor

Sealed Air

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

KLA Tencor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Tencor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, KLA Tencor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sealed Air and KLA Tencor

The main advantage of trading using opposite Sealed Air and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sealed Air 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 Sealed Air 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.