Correlation Between Cisco Systems and KLA Tencor
Can any of the company-specific risk be diversified away by investing in both Cisco Systems 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 Cisco Systems and KLA Tencor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and KLA Tencor, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of KLA Tencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and KLA Tencor.
Diversification Opportunities for Cisco Systems and KLA Tencor
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cisco and KLA is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and KLA Tencor go up and down completely randomly.
Pair Corralation between Cisco Systems and KLA Tencor
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.58 times more return on investment than KLA Tencor. However, Cisco Systems is 1.71 times less risky than KLA Tencor. It trades about 0.26 of its potential returns per unit of risk. KLA Tencor is currently generating about -0.22 per unit of risk. If you would invest 5,568 in Cisco Systems on August 30, 2024 and sell it today you would earn a total of 361.00 from holding Cisco Systems or generate 6.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. KLA Tencor
Performance |
| Timeline |
| Cisco Systems |
| KLA Tencor |
Cisco Systems and KLA Tencor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and KLA Tencor
The main advantage of trading using opposite Cisco Systems and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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.| Cisco Systems vs. NETGEAR | Cisco Systems vs. Clearfield | Cisco Systems vs. ABIVAX Socit Anonyme | Cisco Systems vs. Morningstar Unconstrained Allocation |
| 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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