Correlation Between KLA Tencor and Daqo New
Can any of the company-specific risk be diversified away by investing in both KLA Tencor and Daqo New 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 Daqo New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and Daqo New Energy, you can compare the effects of market volatilities on KLA Tencor and Daqo New 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 Daqo New. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Daqo New.
Diversification Opportunities for KLA Tencor and Daqo New
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KLA and Daqo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Daqo New Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daqo New Energy 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 Daqo New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daqo New Energy has no effect on the direction of KLA Tencor i.e., KLA Tencor and Daqo New go up and down completely randomly.
Pair Corralation between KLA Tencor and Daqo New
Given the investment horizon of 90 days KLA Tencor is expected to generate 0.67 times more return on investment than Daqo New. However, KLA Tencor is 1.5 times less risky than Daqo New. It trades about -0.1 of its potential returns per unit of risk. Daqo New Energy is currently generating about -0.14 per unit of risk. If you would invest 68,842 in KLA Tencor on January 26, 2024 and sell it today you would lose (3,188) from holding KLA Tencor or give up 4.63% 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. Daqo New Energy
Performance |
Timeline |
KLA Tencor |
Daqo New Energy |
KLA Tencor and Daqo New Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KLA Tencor and Daqo New
The main advantage of trading using opposite KLA Tencor and Daqo New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, Daqo New 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 Daqo New will offset losses from the drop in Daqo New's long position.KLA Tencor vs. Applied Materials | KLA Tencor vs. ASML Holding NV | KLA Tencor vs. Axcelis Technologies | KLA Tencor vs. Lam Research Corp |
Daqo New vs. KLA Tencor | Daqo New vs. ASML Holding NV | Daqo New vs. Axcelis Technologies | Daqo New 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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