Correlation Between KLA Tencor and Nokia Corp
Can any of the company-specific risk be diversified away by investing in both KLA Tencor and Nokia Corp 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 Nokia Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and Nokia Corp ADR, you can compare the effects of market volatilities on KLA Tencor and Nokia Corp 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 Nokia Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Nokia Corp.
Diversification Opportunities for KLA Tencor and Nokia Corp
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KLA and Nokia is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Nokia Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia Corp ADR 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 Nokia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia Corp ADR has no effect on the direction of KLA Tencor i.e., KLA Tencor and Nokia Corp go up and down completely randomly.
Pair Corralation between KLA Tencor and Nokia Corp
Given the investment horizon of 90 days KLA Tencor is expected to generate 1.0 times more return on investment than Nokia Corp. However, KLA Tencor is 1.0 times more volatile than Nokia Corp ADR. It trades about -0.22 of its potential returns per unit of risk. Nokia Corp ADR is currently generating about -0.34 per unit of risk. If you would invest 69,430 in KLA Tencor on August 30, 2024 and sell it today you would lose (6,216) from holding KLA Tencor or give up 8.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KLA Tencor vs. Nokia Corp ADR
Performance |
| Timeline |
| KLA Tencor |
| Nokia Corp ADR |
KLA Tencor and Nokia Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KLA Tencor and Nokia Corp
The main advantage of trading using opposite KLA Tencor and Nokia Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, Nokia Corp 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 Nokia Corp will offset losses from the drop in Nokia Corp's long position.| KLA Tencor vs. Applied Materials | KLA Tencor vs. ASML Holding NV | KLA Tencor vs. Axcelis Technologies | KLA Tencor vs. Teradyne |
| Nokia Corp vs. Hewlett Packard Enterprise | Nokia Corp vs. Juniper Networks | Nokia Corp vs. Ciena Corp | Nokia Corp vs. Motorola Solutions |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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