Correlation Between KLA Tencor and SmartKem, Common

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Can any of the company-specific risk be diversified away by investing in both KLA Tencor and SmartKem, Common 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 SmartKem, Common into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and SmartKem, Common Stock, you can compare the effects of market volatilities on KLA Tencor and SmartKem, Common 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 SmartKem, Common. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and SmartKem, Common.

Diversification Opportunities for KLA Tencor and SmartKem, Common

0.51
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between KLA Tencor and SmartKem, Common

Given the investment horizon of 90 days KLA Tencor is expected to generate 0.4 times more return on investment than SmartKem, Common. However, KLA Tencor is 2.49 times less risky than SmartKem, Common. It trades about -0.01 of its potential returns per unit of risk. SmartKem, Common Stock is currently generating about -0.17 per unit of risk. If you would invest  71,346  in KLA Tencor on August 11, 2024 and sell it today you would lose (2,605) from holding KLA Tencor or give up 3.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

KLA Tencor  vs.  SmartKem, Common Stock

 Performance 
       Timeline  
KLA Tencor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very 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.
SmartKem, Common Stock 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SmartKem, Common Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

KLA Tencor and SmartKem, Common Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KLA Tencor and SmartKem, Common

The main advantage of trading using opposite KLA Tencor and SmartKem, Common positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor position performs unexpectedly, SmartKem, Common 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 SmartKem, Common will offset losses from the drop in SmartKem, Common's long position.
The idea behind KLA Tencor and SmartKem, Common Stock 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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