Correlation Between Monolithic Power and KLA Tencor

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

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

Diversification Opportunities for Monolithic Power and KLA Tencor

0.85

Correlation Coefficient

Monolithic Power  KLA Tencor

Very poor diversification

The 3 months correlation between Monolithic and KLA is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Monolithic Power Systems and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and Monolithic Power 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 Monolithic Power Systems are associated (or correlated) with KLA Tencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Tencor has no effect on the direction of Monolithic Power i.e., Monolithic Power and KLA Tencor go up and down completely randomly.

Pair Corralation between Monolithic Power and KLA Tencor

Given the investment horizon of 90 days Monolithic Power is expected to generate 1.1 times less return on investment than KLA Tencor. In addition to that, Monolithic Power is 1.35 times more volatile than KLA Tencor. It trades about 0.15 of its total potential returns per unit of risk. KLA Tencor is currently generating about 0.22 per unit of volatility. If you would invest  67,779  in KLA Tencor on May 6, 2025 and sell it today you would earn a total of  20,885  from holding KLA Tencor or generate 30.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Monolithic Power Systems  vs.  KLA Tencor

Monolithic Power Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monolithic Power Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Monolithic Power reported solid returns over the last few months and may actually be approaching a breakup point.

KLA Tencor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Tencor are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, KLA Tencor exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monolithic Power and KLA Tencor

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

The idea behind Monolithic Power Systems and KLA Tencor 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..