Correlation Between Valens and KLA Tencor

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

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

Diversification Opportunities for Valens and KLA Tencor

0.51

Correlation Coefficient

Valens  KLA Tencor

Very weak diversification

The 3 months correlation between Valens and KLA is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Valens and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Valens 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 Valens 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 Valens i.e., Valens and KLA Tencor go up and down completely randomly.

Pair Corralation between Valens and KLA Tencor

Considering the 90-day investment horizon Valens is expected to under-perform the KLA Tencor. In addition to that, Valens is 1.49 times more volatile than KLA Tencor. It trades about -0.03 of its total potential returns per unit of risk. KLA Tencor is currently generating about 0.06 per unit of volatility. If you would invest  36,342  in KLA Tencor on September 15, 2024 and sell it today you would earn a total of  29,034  from holding KLA Tencor or generate 79.89% return on investment over 90 days.

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

Valens  vs.  KLA Tencor

Valens

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Valens is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Valens and KLA Tencor

The main advantage of trading using opposite Valens and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valens 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 Valens 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.