Correlation Between KLA Tencor and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both KLA Tencor and IPG Photonics 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 IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and IPG Photonics, you can compare the effects of market volatilities on KLA Tencor and IPG Photonics 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 IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and IPG Photonics.
Diversification Opportunities for KLA Tencor and IPG Photonics
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between KLA and IPG is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics 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 IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of KLA Tencor i.e., KLA Tencor and IPG Photonics go up and down completely randomly.
Pair Corralation between KLA Tencor and IPG Photonics
Given the investment horizon of 90 days KLA Tencor is expected to generate 0.85 times more return on investment than IPG Photonics. However, KLA Tencor is 1.17 times less risky than IPG Photonics. It trades about 0.11 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.03 per unit of risk. If you would invest 40,577 in KLA Tencor on January 19, 2024 and sell it today you would earn a total of 23,845 from holding KLA Tencor or generate 58.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KLA Tencor vs. IPG Photonics
Performance |
| Timeline |
| KLA Tencor |
| IPG Photonics |
KLA Tencor and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KLA Tencor and IPG Photonics
The main advantage of trading using opposite KLA Tencor and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, IPG Photonics 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 IPG Photonics will offset losses from the drop in IPG Photonics' long position.| KLA Tencor vs. Photronics | KLA Tencor vs. Ultra Clean Holdings | KLA Tencor vs. Axcelis Technologies | KLA Tencor vs. Ichor Holdings |
| IPG Photonics vs. Entegris | IPG Photonics vs. Amtech Systems | IPG Photonics vs. Nova | IPG Photonics vs. Axcelis 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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