Correlation Between BCULC and KLA Tencor

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

By analyzing existing cross correlation between BCULC 35 15 FEB 29 and KLA Tencor, you can compare the effects of market volatilities on BCULC 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 BCULC with a short position of KLA Tencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCULC and KLA Tencor.

Diversification Opportunities for BCULC and KLA Tencor

-0.74

Correlation Coefficient

BCULC  KLA Tencor

Pay attention - limited upside

The 3 months correlation between BCULC and KLA is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding BCULC 35 15 FEB 29 and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and BCULC 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 BCULC 35 15 FEB 29 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 BCULC i.e., BCULC and KLA Tencor go up and down completely randomly.

Pair Corralation between BCULC and KLA Tencor

Assuming the 90 days trading horizon BCULC is expected to generate 22.12 times less return on investment than KLA Tencor. But when comparing it to its historical volatility, BCULC 35 15 FEB 29 is 2.45 times less risky than KLA Tencor. It trades about 0.01 of its potential returns per unit of risk. KLA Tencor is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  40,820  in KLA Tencor on September 29, 2024 and sell it today you would earn a total of  23,661  from holding KLA Tencor or generate 57.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	27.1%
Values	Daily Returns

BCULC 35 15 FEB 29  vs.  KLA Tencor

BCULC 35 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCULC 35 15 FEB 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for BCULC 35 15 FEB 29 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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with BCULC and KLA Tencor

The main advantage of trading using opposite BCULC and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCULC 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 BCULC 35 15 FEB 29 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.