Correlation Between KLA Tencor and Advantest

Can any of the company-specific risk be diversified away by investing in both KLA Tencor and Advantest 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 Advantest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KLA Tencor and Advantest, you can compare the effects of market volatilities on KLA Tencor and Advantest 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 Advantest. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Advantest.

Diversification Opportunities for KLA Tencor and Advantest

0.51

Correlation Coefficient

KLA Tencor  Advantest

Very weak diversification

The 3 months correlation between KLA and Advantest is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Advantest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantest 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 Advantest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantest has no effect on the direction of KLA Tencor i.e., KLA Tencor and Advantest go up and down completely randomly.

Pair Corralation between KLA Tencor and Advantest

Given the investment horizon of 90 days KLA Tencor is expected to generate 0.79 times more return on investment than Advantest. However, KLA Tencor is 1.26 times less risky than Advantest. It trades about -0.22 of its potential returns per unit of risk. Advantest is currently generating about -0.42 per unit of risk. If you would invest  69,973  in KLA Tencor on January 24, 2024 and sell it today you would lose (6,609) from holding KLA Tencor or give up 9.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

KLA Tencor  vs.  Advantest

KLA Tencor

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days KLA Tencor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, KLA Tencor is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Advantest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advantest has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KLA Tencor and Advantest

The main advantage of trading using opposite KLA Tencor and Advantest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, Advantest 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 Advantest will offset losses from the drop in Advantest's long position.

The idea behind KLA Tencor and Advantest 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.