Correlation Between Universal and KLA Tencor

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

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

Diversification Opportunities for Universal and KLA Tencor

-0.59

Correlation Coefficient

Universal  KLA Tencor

Excellent diversification

The 3 months correlation between Universal and KLA is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Universal and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Universal 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 Universal 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 Universal i.e., Universal and KLA Tencor go up and down completely randomly.

Pair Corralation between Universal and KLA Tencor

Considering the 90-day investment horizon Universal is expected to generate 3.33 times less return on investment than KLA Tencor. But when comparing it to its historical volatility, Universal is 1.61 times less risky than KLA Tencor. It trades about 0.02 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  41,135  in KLA Tencor on October 4, 2024 and sell it today you would earn a total of  22,264  from holding KLA Tencor or generate 54.12% return on investment over 90 days.

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

Universal  vs.  KLA Tencor

Universal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated 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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Universal and KLA Tencor

The main advantage of trading using opposite Universal and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal 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 Universal 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.