Correlation Between Cebu Air and KLA Tencor
Can any of the company-specific risk be diversified away by investing in both Cebu Air 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 Cebu Air and KLA Tencor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cebu Air ADR and KLA Tencor, you can compare the effects of market volatilities on Cebu Air 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 Cebu Air with a short position of KLA Tencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and KLA Tencor.
Diversification Opportunities for Cebu Air and KLA Tencor
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cebu and KLA is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Cebu Air 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 Cebu Air ADR 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 Cebu Air i.e., Cebu Air and KLA Tencor go up and down completely randomly.
Pair Corralation between Cebu Air and KLA Tencor
Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the KLA Tencor. In addition to that, Cebu Air is 1.32 times more volatile than KLA Tencor. It trades about -0.02 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 36,611 in KLA Tencor on September 12, 2024 and sell it today you would earn a total of 27,576 from holding KLA Tencor or generate 75.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cebu Air ADR vs. KLA Tencor
Performance |
| Timeline |
| Cebu Air ADR |
| KLA Tencor |
Cebu Air and KLA Tencor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cebu Air and KLA Tencor
The main advantage of trading using opposite Cebu Air and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air 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.| Cebu Air vs. Finnair Oyj | Cebu Air vs. easyJet plc | Cebu Air vs. Norse Atlantic ASA | Cebu Air vs. Air New Zealand |
| KLA Tencor vs. Applied Materials | KLA Tencor vs. ASML Holding NV | KLA Tencor vs. Axcelis Technologies | KLA Tencor vs. Teradyne |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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