Correlation Between KLA Tencor and First Solar
Can any of the company-specific risk be diversified away by investing in both KLA Tencor and First Solar 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 First Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and First Solar, you can compare the effects of market volatilities on KLA Tencor and First Solar 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 First Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and First Solar.
Diversification Opportunities for KLA Tencor and First Solar
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KLA and First is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar 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 First Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Solar has no effect on the direction of KLA Tencor i.e., KLA Tencor and First Solar go up and down completely randomly.
Pair Corralation between KLA Tencor and First Solar
Given the investment horizon of 90 days KLA Tencor is expected to generate 0.74 times more return on investment than First Solar. However, KLA Tencor is 1.36 times less risky than First Solar. It trades about 0.05 of its potential returns per unit of risk. First Solar is currently generating about 0.03 per unit of risk. If you would invest 38,527 in KLA Tencor on August 30, 2024 and sell it today you would earn a total of 24,687 from holding KLA Tencor or generate 64.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
KLA Tencor vs. First Solar
Performance |
| Timeline |
| KLA Tencor |
| First Solar |
KLA Tencor and First Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KLA Tencor and First Solar
The main advantage of trading using opposite KLA Tencor and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, First Solar 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 First Solar will offset losses from the drop in First Solar's long position.| KLA Tencor vs. Applied Materials | KLA Tencor vs. ASML Holding NV | KLA Tencor vs. Axcelis Technologies | KLA Tencor vs. Teradyne |
| First Solar vs. Enphase Energy | First Solar vs. Sunrun Inc | First Solar vs. Canadian Solar | First Solar vs. SolarEdge Technologies |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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