Correlation Between Analog Devices and KLA Tencor
Can any of the company-specific risk be diversified away by investing in both Analog Devices 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 Analog Devices and KLA Tencor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and KLA Tencor, you can compare the effects of market volatilities on Analog Devices 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 Analog Devices with a short position of KLA Tencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and KLA Tencor.
Diversification Opportunities for Analog Devices and KLA Tencor
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Analog and KLA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and KLA Tencor go up and down completely randomly.
Pair Corralation between Analog Devices and KLA Tencor
Considering the 90-day investment horizon Analog Devices is expected to under-perform the KLA Tencor. In addition to that, Analog Devices is 1.04 times more volatile than KLA Tencor. It trades about -0.07 of its total potential returns per unit of risk. KLA Tencor is currently generating about -0.07 per unit of volatility. If you would invest 66,753 in KLA Tencor on September 2, 2024 and sell it today you would lose (2,050) from holding KLA Tencor or give up 3.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. KLA Tencor
Performance |
| Timeline |
| Analog Devices |
| KLA Tencor |
Analog Devices and KLA Tencor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and KLA Tencor
The main advantage of trading using opposite Analog Devices and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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.| Analog Devices vs. NXP Semiconductors NV | Analog Devices vs. Qualcomm Incorporated | Analog Devices vs. Broadcom | Analog Devices vs. Microchip Technology |
| KLA Tencor vs. NXP Semiconductors NV | KLA Tencor vs. GSI Technology | KLA Tencor vs. MaxLinear | KLA Tencor vs. Texas Instruments Incorporated |
Check out your portfolio center.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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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