Correlation Between Trimble and MKS Instruments

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

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

Diversification Opportunities for Trimble and MKS Instruments

0.81

Correlation Coefficient

Trimble  MKS Instruments

Very poor diversification

The 3 months correlation between Trimble and MKS is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and MKS Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKS Instruments and Trimble 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 Trimble are associated (or correlated) with MKS Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKS Instruments has no effect on the direction of Trimble i.e., Trimble and MKS Instruments go up and down completely randomly.

Pair Corralation between Trimble and MKS Instruments

Given the investment horizon of 90 days Trimble is expected to generate 2.75 times less return on investment than MKS Instruments. But when comparing it to its historical volatility, Trimble is 1.51 times less risky than MKS Instruments. It trades about 0.23 of its potential returns per unit of risk. MKS Instruments is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  10,252  in MKS Instruments on October 20, 2024 and sell it today you would earn a total of  1,759  from holding MKS Instruments or generate 17.16% return on investment over 90 days.

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

Trimble  vs.  MKS Instruments

Trimble

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal primary indicators, Trimble sustained solid returns over the last few months and may actually be approaching a breakup point.

MKS Instruments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MKS Instruments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, MKS Instruments demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trimble and MKS Instruments

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

The idea behind Trimble and MKS Instruments 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.