Correlation Between KLA Tencor and Drilling Tools
Can any of the company-specific risk be diversified away by investing in both KLA Tencor and Drilling Tools 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 Drilling Tools into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and Drilling Tools International, you can compare the effects of market volatilities on KLA Tencor and Drilling Tools 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 Drilling Tools. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Drilling Tools.
Diversification Opportunities for KLA Tencor and Drilling Tools
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KLA and Drilling is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Drilling Tools International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drilling Tools Inter 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 Drilling Tools. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drilling Tools Inter has no effect on the direction of KLA Tencor i.e., KLA Tencor and Drilling Tools go up and down completely randomly.
Pair Corralation between KLA Tencor and Drilling Tools
Given the investment horizon of 90 days KLA Tencor is expected to generate 0.64 times more return on investment than Drilling Tools. However, KLA Tencor is 1.56 times less risky than Drilling Tools. It trades about 0.05 of its potential returns per unit of risk. Drilling Tools International is currently generating about -0.02 per unit of risk. If you would invest 46,867 in KLA Tencor on September 2, 2024 and sell it today you would earn a total of 17,836 from holding KLA Tencor or generate 38.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KLA Tencor vs. Drilling Tools International
Performance |
| Timeline |
| KLA Tencor |
| Drilling Tools Inter |
KLA Tencor and Drilling Tools Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KLA Tencor and Drilling Tools
The main advantage of trading using opposite KLA Tencor and Drilling Tools positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, Drilling Tools 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 Drilling Tools will offset losses from the drop in Drilling Tools' long position.| KLA Tencor vs. NXP Semiconductors NV | KLA Tencor vs. GSI Technology | KLA Tencor vs. MaxLinear | KLA Tencor vs. Texas Instruments Incorporated |
| Drilling Tools vs. Nike Inc | Drilling Tools vs. Comstock Holding Companies | Drilling Tools vs. Tandy Leather Factory | Drilling Tools vs. Crombie Real Estate |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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