Correlation Between KLA Tencor and Eros STX

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

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

Diversification Opportunities for KLA Tencor and Eros STX

0.0

Correlation Coefficient

KLA Tencor  Eros STX

Pay attention - limited upside

The 3 months correlation between KLA and Eros is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Eros STX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eros STX Global 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 Eros STX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eros STX Global has no effect on the direction of KLA Tencor i.e., KLA Tencor and Eros STX go up and down completely randomly.

Pair Corralation between KLA Tencor and Eros STX

If you would invest  61,352  in KLA Tencor on February 3, 2024 and sell it today you would earn a total of  6,853  from holding KLA Tencor or generate 11.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

KLA Tencor  vs.  Eros STX Global

KLA Tencor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Tencor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, KLA Tencor may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Eros STX Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros STX Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eros STX is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KLA Tencor and Eros STX

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

The idea behind KLA Tencor and Eros STX Global 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.