Correlation Between KLA Tencor and Analog Devices
Can any of the company-specific risk be diversified away by investing in both KLA Tencor and Analog Devices 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 KLA Tencor and Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and Analog Devices, you can compare the effects of market volatilities on KLA Tencor and Analog Devices 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 KLA Tencor with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Analog Devices.
Diversification Opportunities for KLA Tencor and Analog Devices
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KLA and Analog is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and KLA Tencor 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 KLA Tencor are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of KLA Tencor i.e., KLA Tencor and Analog Devices go up and down completely randomly.
Pair Corralation between KLA Tencor and Analog Devices
Given the investment horizon of 90 days KLA Tencor is expected to generate 1.16 times more return on investment than Analog Devices. However, KLA Tencor is 1.16 times more volatile than Analog Devices. It trades about 0.56 of its potential returns per unit of risk. Analog Devices is currently generating about 0.18 per unit of risk. If you would invest 62,218 in KLA Tencor on October 20, 2024 and sell it today you would earn a total of 13,529 from holding KLA Tencor or generate 21.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KLA Tencor vs. Analog Devices
Performance |
| Timeline |
| KLA Tencor |
| Analog Devices |
KLA Tencor and Analog Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KLA Tencor and Analog Devices
The main advantage of trading using opposite KLA Tencor and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.| KLA Tencor vs. Applied Materials | KLA Tencor vs. ASML Holding NV | KLA Tencor vs. Axcelis Technologies | KLA Tencor vs. Teradyne |
| Analog Devices vs. NXP Semiconductors NV | Analog Devices vs. Qualcomm Incorporated | Analog Devices vs. Broadcom | Analog Devices vs. Microchip Technology |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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