Correlation Between Tokyo Electron and KLA
Can any of the company-specific risk be diversified away by investing in both Tokyo Electron and KLA 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 Tokyo Electron and KLA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tokyo Electron Limited and KLA Corporation, you can compare the effects of market volatilities on Tokyo Electron and KLA 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 Tokyo Electron with a short position of KLA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokyo Electron and KLA.
Diversification Opportunities for Tokyo Electron and KLA
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tokyo and KLA is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electron Limited and KLA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Corporation and Tokyo Electron 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 Tokyo Electron Limited are associated (or correlated) with KLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Corporation has no effect on the direction of Tokyo Electron i.e., Tokyo Electron and KLA go up and down completely randomly.
Pair Corralation between Tokyo Electron and KLA
Assuming the 90 days horizon Tokyo Electron is expected to generate 1.66 times less return on investment than KLA. In addition to that, Tokyo Electron is 1.19 times more volatile than KLA Corporation. It trades about 0.13 of its total potential returns per unit of risk. KLA Corporation is currently generating about 0.25 per unit of volatility. If you would invest 64,300 in KLA Corporation on November 5, 2024 and sell it today you would earn a total of 9,680 from holding KLA Corporation or generate 15.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tokyo Electron Limited vs. KLA Corp.
Performance |
| Timeline |
| Tokyo Electron |
| KLA Corporation |
Tokyo Electron and KLA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tokyo Electron and KLA
The main advantage of trading using opposite Tokyo Electron and KLA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyo Electron position performs unexpectedly, KLA 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 KLA will offset losses from the drop in KLA's long position.| Tokyo Electron vs. ASML HOLDING NY | Tokyo Electron vs. ASML Holding NV | Tokyo Electron vs. ASML Holding NV | Tokyo Electron vs. Applied Materials |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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