Correlation Between KLA Tencor and Onto Innovation
Can any of the company-specific risk be diversified away by investing in both KLA Tencor and Onto Innovation 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 Onto Innovation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and Onto Innovation, you can compare the effects of market volatilities on KLA Tencor and Onto Innovation 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 Onto Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Onto Innovation.
Diversification Opportunities for KLA Tencor and Onto Innovation
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KLA and Onto is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Onto Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onto Innovation 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 Onto Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onto Innovation has no effect on the direction of KLA Tencor i.e., KLA Tencor and Onto Innovation go up and down completely randomly.
Pair Corralation between KLA Tencor and Onto Innovation
Given the investment horizon of 90 days KLA Tencor is expected to generate 0.59 times more return on investment than Onto Innovation. However, KLA Tencor is 1.7 times less risky than Onto Innovation. It trades about -0.09 of its potential returns per unit of risk. Onto Innovation is currently generating about -0.25 per unit of risk. If you would invest 67,248 in KLA Tencor on August 28, 2024 and sell it today you would lose (2,781) from holding KLA Tencor or give up 4.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KLA Tencor vs. Onto Innovation
Performance |
| Timeline |
| KLA Tencor |
| Onto Innovation |
KLA Tencor and Onto Innovation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KLA Tencor and Onto Innovation
The main advantage of trading using opposite KLA Tencor and Onto Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, Onto Innovation 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 Onto Innovation will offset losses from the drop in Onto Innovation's long position.The idea behind KLA Tencor and Onto Innovation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Onto Innovation vs. Camtek | Onto Innovation vs. Amtech Systems | Onto Innovation vs. Veeco Instruments | Onto Innovation vs. Ichor Holdings |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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