Correlation Between Universal and KLA Tencor
Can any of the company-specific risk be diversified away by investing in both Universal and KLA Tencor 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 Universal and KLA Tencor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal and KLA Tencor, you can compare the effects of market volatilities on Universal and KLA Tencor 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 Universal with a short position of KLA Tencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal and KLA Tencor.
Diversification Opportunities for Universal and KLA Tencor
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and KLA is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Universal and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Universal 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 Universal are associated (or correlated) with KLA Tencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Tencor has no effect on the direction of Universal i.e., Universal and KLA Tencor go up and down completely randomly.
Pair Corralation between Universal and KLA Tencor
Considering the 90-day investment horizon Universal is expected to under-perform the KLA Tencor. But the stock apears to be less risky and, when comparing its historical volatility, Universal is 2.33 times less risky than KLA Tencor. The stock trades about -0.02 of its potential returns per unit of risk. The KLA Tencor is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 70,113 in KLA Tencor on November 28, 2024 and sell it today you would earn a total of 4,446 from holding KLA Tencor or generate 6.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Universal vs. KLA Tencor
Performance |
| Timeline |
| Universal |
| KLA Tencor |
Universal and KLA Tencor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal and KLA Tencor
The main advantage of trading using opposite Universal and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal position performs unexpectedly, KLA Tencor 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 Tencor will offset losses from the drop in KLA Tencor's long position.| Universal vs. Imperial Brands PLC | Universal vs. Japan Tobacco ADR | Universal vs. Philip Morris International | Universal vs. Turning Point Brands |
| KLA Tencor vs. Applied Materials | KLA Tencor vs. ASML Holding NV | KLA Tencor vs. Axcelis Technologies | KLA Tencor vs. Teradyne |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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